Now can be a great time to buy a house, especially if you’ve never owned one before. The Government is offering significant tax credits to first time home buyers and the interest rates are still very low. Before you jump into home ownership, though, you will need to find a qualified professional to give you proper financial advice for a mortgage.
Buying a house consists of much more than signing on the dotted line. There are a myriad of loan types available and choosing the right one for your situation is very important. Whatever type of mortgage you get will have long term financial consequences for you, this is too important a decision to rush in to uninformed.
Many homeowners are finding themselves in a tough situation now because they got an adjustable rate mortgage. What that means is that the interest rate they got for their loan was only fixed for a specific time frame. After that point the interest rate would be adjusted according to whatever the prevailing rate was. For many homeowners their mortgage payments were doubled, or even tripled when their rate adjusted. Few homeowners could afford the higher payment.
That is the reason that anyone who is considering an adjustable rate mortgage should find a professional who can carefully spell out the advantages and the disadvantages. It is imperative that you ask questions, and continue to ask until you get an answer that you can understand. One part of the problem is that a lot of people are afraid of looking ‘dumb’. It’s for this reason that they won’t press their mortgage lender for a clearer answer. They will ask the question, get an answer they don’t really understand but feel too intimidated to have the lender clarify.
You should never allow your fear of looking dumb stop you from getting all the information you need to make an informed decision. It’s the mortgage lenders job to understand all the in’s and out’s of mortgages, it’s not your job. It’s also part of their job to not just understand it all but to be able to explain it in terms anyone can understand. In this case, what you don’t know really can hurt you…a lot.
Another reason some people make poor decisions when it comes to getting a mortgage loan is unrealistic expectations. They will sign up for an adjustable rate mortgage where the payment is at the top of what they can afford. They are gambling that the rates will go down by the time they have to adjust their rate,or they are gambling that they will get a promotion and be making more money.
This is not a good way to conduct your financial affairs. You should always try to avoid going to the absolute top of your price limit and mortgage payment. Leave yourself a little wiggle room. You never know what the future holds. If you do get that great promotion just apply more to your principle and pay your mortgage off more quickly.
One thing you need to keep in mind if you find yourself in a position to pay down your mortgage is that many accountants will actually talk you out of paying off your mortgage since you will lose a tax deduction. For most people this advice is bad advice. You need to ask your accountant how much of a tax deduction you actually get every year from your mortgage interest. Than ask them how much you pay in interest every year. Unless you will save more in the tax deduction than you would spend on interest you will probably be better off paying off your mortgage. Make sure you ask this question of your accountant.
Finding good financial advice for mortgages is extremely important. Don’t skimp, and don’t be afraid to ask questions. It’s your money, and your future you have the right to be informed.