Home Mortgage Tips
The majority of Americans want to improve their living conditions. And if you do not have your own cash, then there is only one way out – to take a mortgage loan. But home loans are not cheap. But as a rule, paying for “one’s own home” for many years is better than giving money for renting an apartment. And don’t forget that the value of a real estate is constantly growing. There are periods when it decreases, but they usually are not long. And after a short downturn, real estate starts to grow at a faster pace. And if you still decided on such a step as buying a home, then this article is just for you.
Tip 1. Size does matter
When choosing a bank to apply for a mortgage loan, immediately pay attention to the interest rate. It seems to be logical and everyone understands this. The lower the loan rate, the better for you. But many borrowers do not pay attention to the minimum difference that different banks may have. Let’s say 12% and 12.5% – it seems like the difference is not big. Meanwhile, you need to remember that you take out a loan for many years. And such a tiny difference over a long period can give you a serious overpayment.
Tip 2. Take out a loan in the currency in which you receive income
This rule applies not only to home mortgages but applies to all loans. If you receive your paycheck in euro, then the mortgage should also be in euro. Otherwise, when the exchange rate rises, you run the risk of significantly falling into additional costs.
Tip 3. Fixed or floating interest
The borrower is faced with a choice: take a loan at fixed or floating interest rates for the entire loan period. Floating interest rates are usually lower than fixed percentages.
Tip 4. The less, the better
The golden rule is: “Loan payments must not exceed 30% of your household income.” But many Americans have loans that eat up 50% or even 70% of their total income in the hope of a brighter future: they should increase their salaries, they will raise their positions, find another more profitable job. But as a rule, it all ends badly. Any emergency situation can cripple their financial situation. Loss of work, illness, urgent car repairs, etc. All this must be taken into account before trying by any means to try to get a mortgage with unbearable payments for several decades.
Tip 5. Take a higher amount
Buying an apartment with a mortgage will be associated with additional costs. It will be necessary to make repairs, purchase furniture, household appliances, interior, and much more. And all this can cost a pretty penny. Therefore, when you take out a loan, apply for the maximum possible amount. All the remaining money after buying real estate should be better spent on this business. The gain lies in the fact that this is “cheap” money taken at low-interest rates (12-13% per annum). And if you do not have free funds for repairs, then you will have to take an additional personal loan, the cost of which is 1.5 – 2 times higher.
Tip 6. Want it all at once?
Buying an apartment on credit, many Americans are immediately aimed at the future: I will start a family, have children, which means a large multi-room apartment is needed. And then they pay the loan for it almost all their lives, as a result, overpaying the cost of several such apartments. Maybe you should start small? Buy a more modest property with fewer squares and fewer rooms. In order to pay for it, it will take you much less time (and money). And then you can already consider the option of buying a larger apartment. Firstly, such a scheme will give you very significant savings in the form of loan overpayment. Secondly, you would feel much more confident financially. Thirdly, when you pay for your first apartment, you will already have a very significant part of the funds when you sell it. And accordingly, a loan for a new apartment can be taken for a much smaller amount.
Tip 7. Be aware of house prices
Before concluding a deal, you need to be guided by real estate prices so as not to buy an apartment at the overpriced requested by the seller. It is better to look through several apartments that interest you and find out what is included in the price of an apartment: whether repairs are needed, convenience and proximity to shops, roads, schools, kindergartens, year of construction, number of floors, view from the window. And only when you have an approximate situation in the real estate market, you should start looking for an apartment at the best price.
Tip 8. Buy a liquid property
When buying an apartment, try to avoid objects that will be difficult to sell in the future, even if you are not planning it at the moment. Anything happens in life and it is better to foresee such a situation in advance.
Which apartments are difficult to sell?
- Apartments in old houses built more than 25-30 years ago. As long as you pay off your mortgage, the house will become even more obsolete. And the bank usually does not give loans for apartments built more than 40 years ago;
- apartments in a “bad” area;
- apartments in the immediate vicinity of busy traffic;
- apartments on the first and last floor;
- apartments in the vicinity of factories, industrial production;
- apartments with poor infrastructure;
- apartments away from public transport.
And even if you are offered a fairly attractive price for an apartment, think a hundred times – is it worth it? Selling it in the future, you will also reduce the price and not the fact that you find a buyer.
Tip 9. Bargain
Real estate demand (and prices) starts to rise in late summer and before the New Year. Then the decline begins. There are few buyers and prices are starting to decline slightly. The best time to buy an apartment is the “off-season” – from mid-spring to autumn. During this time, sellers are ready to significantly reduce the price, and “bargaining is appropriate.” It is possible to reduce the originally declared cost of an apartment by several thousand dollars.
Tip 10. Go to the owner directly
When looking for an apartment, in most cases you will come across realtors. Of course, this is their job. They get money for it. But you will pay this money out of your pocket. As a rule, they add several thousand dollars and more to the initial cost of an apartment. If possible, contact the owner of the apartment directly. This way you will save on the “real estate” commission. After all, the most important thing for the seller is to get money for your property faster, and you are ready to make a ready-made purchase offer. Most homeowners will give you a positive answer. Moreover, the bank acts as the guarantor of the transaction and they will take care of the purchase and sale agreement and other documents.