It’s vital that you ensure that your mortgage doesn’t drive you to financial insecurity. Scoring the best terms and interest rates ensure that you don’t run into money problems that could put your home at risk.
If you’ve decided to take the plunge and buy a home, you’re undoubtedly excited about the process and what the future holds. You’re probably looking forward to building equity in the house with each passing month and grow your wealth. Perhaps you’ve already approached a mortgage company in Fort Myers to finances the purchases.
If you’re a savvy borrower, you’ve laid the groundwork to ensure a quick approval at the best possible term. You’d also make sure that you’re not eyeing a home that above your budget range. It’s imperative that you don’t skip this part of the mortgage process.
It saves you a fortune
Your relationship with the bank is purely transactional – they will front you the cash to buy a home if they deem you creditworthy. In other words, the bank will be only too glad to lend you the money because you get to pay back with interest. You can’t escape it, but you can determine how much money you pay as interest.
Three crucial factors – down payment, interest rates, and repayment period, determine how much money you pay back as interest on your home loan. A sizeable deposit, about 20 percent, is advisable as it lowers the interest rates. Naturally, a high-interest rate leads you to payout a small fortune in interest.
Most people make the mistake of picking the 30-year plan because they qualify for a higher loan amount without large monthly payments. However, drawing out the repayment only increases the amount of money you pay out as interest. If you’re saddled with a high rate and extend the repayment, you might end up doubling the final cost of your house.
It ruins the quality of life
Financial pundits advise that you shouldn’t commit more than a third of your paycheck on the mortgage, especially when you’re carrying other debts. You can extend that figure to 40 percent if you don’t have other obligations. Ignoring these guidelines makes you debt-burdened, leaving you financially vulnerable.
If the mortgage payments are taking the lion share of your income, it means that you’ll have trouble paying your other bills. Most importantly, it means that you’re not in a position to create an emergency fund. Without such a fund to cushion your fall, you’re only a paycheck away from a financial disaster.
A recent study found that most Americans would be knocked flat by a $400 emergency since they don’t have saving or an emergency. A poor saving culture and the skyrocketing cost of living often lead many people to put their bills on credit card. High-interest rates on these cards only serve to drive many Americans deeper into debt.
Buying a home is not only a substantial financial commitment, but it also becomes a recurrent debt that will stick with you for a long while. It’s only prudent that you understand how taking out a mortgage affects your finances in the long run. A scoring low-interest rate on the mortgage leaves you in excellent financial shape as it reduces the amount you pay in interest.