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Are you looking for a mortgage? If so, there are many things to take into consideration, here are a few tips to make sure you don’t make a decision lightly and are happy with both your new home and your financial situation.
How much down payment is ideal?
If you put as much money down as possible, you will reduce your mortgage payments, however, you will also deplete your emergency fund and have a tighter monthly budget. What will happen if the roof needs some repairs or if the water heater breaks? Are you able to cover the expenses?
Having a low mortgage payment is great because if you lose your job, you may still be able to easily pay for it, however you should make sure that you keep a little bit of cash, ideally around three to six payments, in case of a financial emergency.
Should you go for a 15 year or a 30 year mortgage?
Once again, going for the 30 year mortgage will reduce the monthly payment but over the long term, you will pay a lot more in interest. There are a lot of mortgage calculators out there that can help you figure out the best option. It may be taking a 30 year mortgage and then making overpayments to reduce the term of the loan, or going for the 15 year term right away and refinance for a longer term should you need to. it is easier to make big mortgage payments when you have to than it is to overpay every month. You will be tempted to spend on other things whereas having to meet your mortgage obligations can give you the needed discipline to repay it in 15 years.
What are the other fees?
Depending on your bank, there may be a processing fee, a closing fee, an inspection fee, and so on. Make sure you are aware of all those fees and include them in your calculations of the overall cost of the mortgage. The rate may be appealing but if there is a $3,000 processing fee upfront, that is a lot of money.
What is the rate and how long does it last?
There are tracker mortgages that will change every time the central bank updates its base rate. There are fixed mortgages that will have the same rate over the life of the loan. There are fixed deals for 2 to 5 years that will then revert to a tracker rate. And a few more options. Again, be sure to read the fine print and to understand all the conditions of your mortgage.
Can you afford the mortgage?
Finally, even if you get a good deal on your house and a low cost mortgage, can you really afford it? What happens if you or your spouse loses his job? Can you repay your mortgage on one income? How long can you stay without a job? Are you better of buying or renting?
All those considerations should be taken really seriously. A mortgage is a big commitment and a life changing experience. If you are unsure, you should talk to a financial advisor.
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At present we have three mortgages, yes all of those we paid processing fee worth of $1,000 each. The problem is the loan term is 3-5 years only. It is correct it eat a lot of cash every month to pay the mortgages. It’s really affect our capacity to save money.
I refinanced at the end of last year. My new mortgage is a 15 year at 2.875%. I couldn’t say no to such a great interest rate. The refinance increased my monthly cost, but saved me about $100,000 in interest over the life of the loan.
This website was… how do I say it? Relevant!!
Finally I’ve found something that helped me. Cheers!
Thank you for sharing the article. It’s very useful. Hope to hear more from you.