Owning a home means money management and good sense. The first step is to sit down and take a hard look at your finances. Then decide to purchase a home where the down payment and mortgage will be what you can afford. Stay well within your means. If possible consult a finance professional and consider putting down a greater down payment.
Cost factors will include: total cost of home; maximum monthly housing cost (approximately 32% of your gross monthly income); and monthly debt load (not more than 40% of your gross monthly income). Try and keep the debt ratio as low as possible.
A reduced monthly mortgage payment is a dream come true for just about everyone. There are many ways in which one can do this:
1. Since interest rates keep changing, you would need to keep a track of changes and opt to refinance at a lower rate when the time is right. This would reduce your outlay considerably. Do the calculations to determine your savings after paying closing costs and other fees.
2. Consider changing from a short term mortgage to a long term mortgage. This will tide you over the financial crunch and enable you to pay lower monthly payments. If your situation strengthens, you could always foreclose the loan.
3. Request for cancellation of the insurance you are paying to secure your mortgage. Once 20% of your loan is settled and you have established a good credit history ask the lender to wave payment towards the insurance. This will help reduce your monthly outlay.
4. Find out where lower homeowner insurance rates are being offered. You will succeed in reducing your PITI payment, principal, interest, tax, and insurance payment.
5. Check your calculations regularly make sure all adjustments are being made correctly.
6. Choose a mortgage that offers a degree of flexibility. In this, interest is paid only on the balance outstanding every day. This means you can pay off the mortgage in accordance to your earnings.
7. Consider an accelerated equity plan or biweekly payments. This will reduce your burden quicker and yield big benefits.
8. Study the details of your mortgage; find out what constitutes the principal and what the interest. Every month, try to pay a little more than the amount due to be adjusted towards the principal. By reducing the principal you will save considerable outlay of funds as interest.
9. Try variable interest or short term loans. Find out about ‘teaser rates”, loans which attract a lower interest for asset period.
10. Consolidate your loans into a single loan with lower payments. Study all the loans, home, car, education, and so on. Make a table and analyze the outlay. Consult a mortgage specialist and find out what consolidation will mean and how much it will reduce your monthly payments by.
A home loan or mortgage is a debt that can be long term and a burden. Advisable is to pay off the mortgage as early as possible. Handle your finances wisely by keeping an eye on interest rates, insurance, and loan disbursements.
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