Wednesday, 16 March 2016

The Best California Mortgage Tips

Buying a home is a somewhat complex process consisting of shopping neighborhoods, houses and mortgages. How much home can you afford? Most importantly, can you qualify for a mortgage?  You should begin the process by learning as many California mortgage company tips as you can, so that you will be well prepared when you do find the right place.

Mortgage Tip Number One

You should always buy a little less house than you can afford. Spending under your maximum allows you to have money left over for the unexpected. Homeowner's insurance only covers part of the costs of damages. The homeowner is always responsible for part of the expenses. Therefore, a small nest egg should always be reserved to pay those costs. When calculating what you can spend on a monthly basis for the mortgage, keep in mind those hidden charges that consistently crop up when you are a homeowner.

Example: A $300,000 mortgage will have a monthly payment of $1,520 with 4.5% interest on a 30 year loan. Keep in mind the accompanying costs: decorating, furnishing, home maintenance, taxes, insurance and utilities, therefore your total costs for housing is well above $1,520. When you're calculating what you can afford, remember to include everything including those extra unexpected costs that result from damages.

Mortgage Tip Number Two

The most important of the California mortgage tips is this one.
Pay extra toward your mortgage and shorten the mortgage period significantly. This could also lessen the amount of interest you pay.  The average person pays an additional 68% or more in interest over the original cost of the home on a 30 year loan. Reduce the time in debt to 15 years by increasing your monthly mortgage payments. Add $425 to your monthly payment in this scenario: $300,000 mortgage at 4.5% with a $1520 monthly payment.  Add $425 to $1520 for a total of $1945 and pay your mortgage off in 15 years. Not only would you own your home outright in 15 years, you would save $107,000 in interest.

Mortgage Tip Number Three

When considering California mortgage tips think soberly about your upfront costs. Should you pay discount points to get a lower interest rate or just make a larger down payment?  A point is equal to 1% of interest and is 1% of the mortgage loan.  To shave 2% interest off of a $300,000 mortgage or 2 points, it would cost you $6,000. It may make better sense to simply add $6,000 extra to the down payment. If your original interest is 4.5% and you only end up paying 2.5% interest, your monthly payment would be $1,185.36. Each month you would save $335 x 12 months equals $4020 per year. In two years you would save $8,040 and you'd continue saving money every year. It would be well worth it to buy the 2 points on a loan like this.

Compare that to a larger deposit of an additional $6,000, you would reduce your loan amount to $294,000. This would require a monthly payment of $1,489.65.  It would take 16 years to save $6000.  It wouldn't be worth the sacrifice of the $6,000 upfront. For more info, check this site.

When you're ready to make the largest purchase you may ever make, the buying of a home, be sure to buy what you can truly afford.  Decide how long you want to be in debt and choose the best savings methods for your purchase. Don't be house poor by owning more home than you can afford to maintain. Pay for your home as quickly as possible to save as much money as possible. Start out with the best purchase deal, either make a larger down payment or buy points to lower the interest rate.

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