Posted by Peggy Farber on 10/4/2017

First time homeowners aren't the only people who are making this financial mistake. Millennials also aren't alone when it comes to approaching home ownership with short sight. Even the Great Recession hasn't stopped everyone who wants to own a house from thinking that they'll come out ahead if they wait until after they buy a house to starting putting money toward their mortgage.

Preparing to buy a house smartly could take years

Settling for making monthly mortgage payments, despite what the lender equates those payments to be, is a mistake. Negotiating for lower mortgage payments is only part of it.

The size of your mortgage down payment is significant. Don't wave this off. In fact, as soon as you become serious about buying a house start saving for your mortgage down payment.

Ways to save for your mortgage down payment include investing half (or more) of your quarterly or annual bonus toward your down payment and depositing your tax refund in an interest bearing account.

Money that you earn from a part-time job, including a virtual gig, could also go toward your mortgage down payment. Instead of tossing out clothes that you no longer wear, sell them to a consignment store and deposit the money into an interest bearing account.

Forward movement pays off

Keep saving  until you save at least 20 percent of the total cost of the house that you want to buy. Don't get fooled into thinking that there is only one house that you'll love. After all, you could buy land and have your dream house built on that land.

In addition to having the leverage to put a hefty down payment toward your mortgage, you'll have leverage to negotiate a better mortgage deal from your lender. You might even secure a mortgage with a lender who would never have approved you for a home loan if you didn't have a huge down payment.

Tax write offs may not be enough to subtract pain caused by this single mortgage regret

The government gives people tax deductions for owning a house for good reason. A house is probably the biggest expense that Americans will take on. Buying a house also helps the economy. It makes good sense to reward home buyers with a tax deduction.

But, even tax deductions may not help homeowners recoup the money that they'll lose by overpaying on their mortgage because of poor decisions that they made before they met with their lender. Poor home buying financial decisions could set Americans up for years of hard-to-make mortgage payments.

This single decision damages personal credit, destroys marriages and causes unsuspecting homeowners to lose their houses, sometimes years after struggling to pay their mortgage. Root of the single act that leads to years of mortgage regret is wishful thinking. The price of this wishful thinking is too high to want to take on. It leaves you unprepared.




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Posted by Peggy Farber on 9/13/2017

 

Two thirds of American homeowners are somewhere in the process of paying off a mortgage. It may seem like common sense that everyone should try to pay off their mortgage sooner rather than later. However, there are circumstances when it benefits a homeowner more to hold onto their mortgage longer.


In this article, weíll offer some tips on paying off your mortgage, when you should refinance, and offer some tools that will help you along the long road to debt-free homeownership. If youíre a homeowner and find yourself asking these questions, read on.

I can afford to pay more each month on my mortgage, but should I?

In many cases, paying off your home as quickly as possible saves you money in the long run. A shorter loan term means less interest applied to your loan which could save you thousands of dollars in accrued interest.


What many people donít think about is whether that money could be better spent elsewhere. If your mortgage interest rate isnít too high, you might be better off allocating that extra income toward investments or retirement funds where they could earn you more in the long run.


This technique is typically most beneficial for younger homeowners. In your 20s and 30s you stand the most to gain from long-term investments, especially tax-benefitted retirement funds. Ultimately youíll have to do the math, which is tricky because circumstances change; markets vary, our income goes up and down, etc. However, a good starting place is to determine whether you could earn more in retirement and investments than you could by paying off your mortgage sooner and therefore saving on interest. 

Iíve owned my home for a few years now, should I refinance?

Refinancing is a term that has become ubiquitous for homeowners. There are a few important things to understand about refinancing. First, lowering your monthly payments is not always ideal if it means youíll end up paying more interest in the long run. Ideally, refinancing your mortgage will help you pay the least amount in total.

One way this can be accomplished is by refinancing to a 15-year fixed-rate mortgage which often darry slightly lower interest rates. This option is designed for people who have improved their credit and increased their income since signing their first mortgage.

Math isnít my strong suit. How can I figure out my finances?

If all of the numbers and percentages associated with mortgages and refinancing seems overwhelming--youíre not alone. Fortunately, there are mortgage and refinancing calculators that will give you a good idea of where you stand if you decide to increase your payments or to attempt to refinance your loan. Here are some great tools:
  • Use this mortgage calculator for determining how much you would save by making extra payments.

  • This refinance calculator will help you understand the potential benefits of refinancing your mortgage.

  • To determine how much you could earn through investments (rather than paying more toward your mortgage) use this helpful tool.

  • You might be able to increase your savings by creating a better budget for yourself. This website will help you make a detailed budget and hold yourself accountable each month.






Tags: Mortgage   home   refinancing   finance  
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Posted by Peggy Farber on 6/8/2016

You might have seen the ads on TV about reverse mortgages, but what is a reverse mortgage? It is a loan for older homeowners that uses a portion of the homeís equity as collateral. Instead of the homeowner paying the lender, it is the lender that pays the homeowner based on the equity in the home. How much can be borrowed? The amount that can be borrowed in a reverse mortgage is determined by an Federal Housing Authority (FHA formula). †The formula considers age, the current interest rate, and the appraised value of the home. What are the requirements for a reverse mortgage? You must be at least age 62 The home must be owned free and clear or all existing liens. Any mortgage balance must be paid off with the proceeds of the reverse mortgage loan at the closing. There are usually no income or credit score requirements. How is the loan repaid? The loan cannot become due as long as at least one homeowner lives in the home as their primary residence and maintains the home in accordance with FHA requirements (keeping taxes and insurance current). The must be repaid when the last surviving homeowner permanently moves out of the property or passes away. The estate will have approximately 6 months to repay the balance of the reverse mortgage or sell the home to pay off the balance.  





Posted by Peggy Farber on 7/8/2015

Buying your first home can be confusing. Securing a mortgage is one of the most important parts of the home buying process. Making sure that you have the right loan and have chosen the right loan officer are among†the things a first time buyer has to do to start the process. Here are some more tips on how to ensure a successful purchase: 1. Make sure your deposit is in order. Talk to your loan officer about what amount of a deposit is required for the purchase and type of loan. You will also want to make sure the funds are accounted for and readily available. You can expect deposits to run anywhere between 3 and 20 percent of the purchase price. 2. Plan to have a cash reserve in addition to your deposit. You may want to have a reserve of at least two months mortgage payments. 3. Ask your lender to go over all the fees that apply to the purchase. It is better to be prepared and know how much the actual purchase will cost. These costs are typically added into your loan but there may be some out of pocket expenses too. 4. Consider how much you can comfortably afford not how much you have been approved for. These numbers may vary considerably. Your mortgage costs should not be more than†30% of your household income. 5. The lowest rate is not always the best deal. You will want to look at not only the rate but also the terms and fees associated with the loan.      





Posted by Peggy Farber on 11/12/2014

Who wouldn't like to pay off the mortgage early? Getting rid of mortgage debt will allow you the security and the psychological benefit of owning your home free and clear. There are lots of ways to accomplish these goals. Here are some suggestions on ways to get rid of your mortgage debt. Compare the options and do what works best for you. 1. Add more money to your monthly payment. This will help pay down the principal balance shortening the length of your loan. When you pay more on your principal is gets lower, and the lower your principal gets, the more every payment from then on is applied to principal, as less goes to cover interest expense. 2. Refinance. Refinance your mortgage to 10, 15 or 20 years. Your payments will be higher on a 15-year loan, but often the rate is lower and the loan is paid off much quicker. If you are afraid to take out a 15- year loan take out a 30-year loan, but make payments as if you had a 15-year loan. 3. Make biweekly payments. Most banks have a biweekly payment plan. Since there are 52 weeks in the year if you pay half your regular mortgage payment every other week, you'll have made 26 half-payments, or 13 payments. There are options when it comes to owning your home free and clear. Just decide which one works for you and be on your way to being mortgage free.