Today we are going to tell you why getting a loan can be very beneficial for you and how to get the most out of it.
Here are the different points that we are going to touch during this post:
- Getting a mortgage can be a great thing for your future
- Interest deduction( what’s that and why should I know about it?)
- Fixed payment
- Increasing equity
Getting a mortgage sounds like a scary step for most of us, and rightfully so it can be if it’s not done right. When someone buys a house, it’s very common to see the case of a confident man/woman/couple who think that they can pay a 30 year mortgage quicker than they are supposed to, and this is a frequent mistake that leads to financial crisis in many cases and regretting having taken a mortgage in the first place.
Don’t be one of those people, and make sure you take your time and evaluate things before jumping off a bridge. If, at the moment, with your current financial situation, you just can afford to go for a 30 year mortgage, wait and save more money. Why? Because you don’t want to become a bank’s slave, pay extra commissions and having that mortgage as the worst of your nightmares. Nearly 100% of the US citizens end up paying extra commissions that benefit the richer and make them poorer in the end.
Getting a mortgage can be a great thing for your future when you save a down payment of at least 10%, but ideally 25%, to then apply to a 15 year fixed-rate mortgage that will ensure a much brighter and happier future.
The interest deduction is another interesting matter to take a look at when buying a property. It can decrease the amount of taxes you’d have to pay for a mortgage, which is certainly something to take into consideration.
One of the reasons reason why in Sean La Rue Home Loans we recommend purchasing a property is because of building equity, which represents one of the main financial benefits of homeownership.
Equity means, in a simple way, how much you owe from your actual home. You have negative equity when you take your loan balance from the value of your home and the result is a negative number.
When can we improve our equity?
1- When we get rid of a good amount of our mortgage payment
2- When the market’s price of our place goes up
*How to reduce loan balance:
- Apply for short mortgages: on average, people struggle a lot more when having to pay longer term mortgages than shorter ones, so you may want to save some more money and make sure you pay your home in the least amount of time possible!
- Make big payments when you can: if things are going well for you, why not taking out some of that mortgage payment? I’m sure it’ll be such a relief.
- Be consistent with your monthly payments: consistency is everything when paying a mortgage, that’s why as time passes, if you’ve been paying regularly every month, more of each payment goes towards equity, and less of each payment becomes interest charges.
People have mixed feelings about mortgages, some think that it’s like you are forced to save money every month, and what many don’t see is that you are building up the value of an asset. With a home, the asset isn’t cash in a savings account—it’s equity in your home.
So that’s all for today, hope you found this article useful so far and don’t hesitate in reaching me out if you have any questions or need a consultation.