Before
putting all you money into mortgage payments, please consider the following 9
important issues. By considering these important financial issues, you will be
able to make your payments work much harder for you.
1. Get
pre-approved BEFORE you look for your new home
Of all the steps to de before you buy a home, the pre-approval part is the
easiest. One of it's benefits: It will give you complete peace-of-mind while you
are looking for a home. The best part, it's usually free. Your local lending
institution can give you a written pre-approval with no obligation on your part.
Getting pre-approved means money in the bank! Being pre-approved means that you
have a guarantee of obtaining a mortgage up to a specified level.
2. Know what level of monthly payment are you
comfortable with
When your are discussing your pre-approved mortgage with your lender
or your lending institution, you will find out up to which level you can borrow.
You must also pre-assess what amount of dollars you want to spend each month on
your home without getting uncomfortable. Your financial situation could give you
a higher level of pre-approval than what you could feel comfortable paying each
month. Once you have set that amount, you will know the price range of the house
that you should be looking for.
3. Select the type of mortgage that will best suit you
Before you commit to a certain type of mortgage, there are a number
of questions you should be asking yourself. Mainly: For how long do you thing
you will own your present house? Are the interest rates going down or up? Will
your earnings change in the near future, will that change have any influence on
your future payments? Once you know the answer to these questions, you should be
in a better position in choosing the appropriate type of mortgage you should be
looking for.
4. Payment frequency options
Accelerated weekly and bi-weekly periodic payments can save you
thousands of dollars in interests payments. If you plan your mortgage periodic
payments well, you will significantly lessen the amount of interest that you
will be charged over the term of the loan.
The best trick is the accelerated bi-weekly mortgage payment system. You pay
every second week half the amount of what should have been your monthly mortgage
payments. By using this system, at the end of the year you will have paid the
equivalent of 13 monthly payments.
Note: Not all mortgages are of the accelerated bi-weekly type.
5. Authorized pre-payment
Another system that can greatly reduce the total interest amount you
will have to pay is the authorized pre-payment system. By paying off a certain
percentage of your mortgage, or by increasing the amount that you pay monthly
will greatly reduce your mortgage costs. By using an authorized pre-payment
system you can have a major impact on the number of years you will have to pay
your mortgage.
Note: Not every mortgage has the prepayment option built in.
6. Portable mortgage
A portable mortgage permits you to use the same mortgage when you
purchase your next property. Basically, under certain conditions, the lender
will authorize you to change home mortgages without any penalties and without
having to go through the entire mortgage process again.
7. Assumable mortgage
An assumable mortgage is a mortgage that you can transfer to the
buyer of your house. It is a very rare type of mortgage, but a very powerful
selling point for your buyer. Furthermore, this type of mortgage comes without
any penalties if it is assumed.
8. Work with a financial expert
Before you choose your mortgage type, the lender or the lending
institution, get the insight of a professional. Ask a mortgage specialist. A
mortgage specialist will usually answer your questions at no cost or obligation
and, if you do use his or her services, you will probably get your mortgage
faster and with better conditions than if you didn't.
9. It's usually better to choose a good house instead
of a good deal
Here is an example. In 2004, two houses were sold. One for $320,000
and the other for $610,000. One was at a major road and the other one, not far
from it, in a reasonably quiet street. Both houses were purchased by respective
owners around 1982. The one at a major road was paid around $70,000 while the
other was paid around $90,000. The owner of the later home not only got higher
appreciation from his house, he also enjoyed a quieter life for 22 years.
DISCLAIMER: The information contained herein is deemed accurate and correct, but
cannot be warranted against changes subsequent to the time of it's publication.
This material is not intended or offered as legal, investment, real estate,
mortgage, insurance, tax, or other advice. The author and the publisher assume
no liability for the use (or misuse) of the material contained in this
publication or related materials. This material is not warranted for any
particular or general purpose whatsoever. Viewers of this material assume any
and all risks for any use of this material.
