| 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:
Since interest rates keep changing you would need to keep a track
of changes and opt for 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.
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.
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.
Find out where lower homeowner insurance rates are being offered.
You will succeed in reducing your PITI payment, principal, interest,
tax, and insurance payment.
Check your calculations regularly make sure all adjustments are
being made correctly.
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.
Consider an accelerated equity plan or biweekly payments. This
will reduce your burden quicker and yield big benefits.
Study the details of your mortgage; find out what constitutes the
principal and what the interest. Every month try and 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.
Try variable interest or short term loans. Find out about ‘teaser
rates”, loans which attract a lower interest for asset period.
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.
by Paul Wilson
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