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 do 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 payments you are comfortable with
When you 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 think 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.
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