It can be hard to figure out which mortgage program is the best fit for you ? should you consider a traditional fixed-rate mortgage, an adjustable rate mortgage, an FHA or VA mortgage? What exactly is a two-step mortgage or a graduated-payment mortgage?
There's never just one mortgage option ? the best mortgage option is dependent on your circumstance and your needs, for the present and the future. You can make the process slightly easier if you take the time to contemplate a few questions.
How long do you expect to live in the home? Some people purchase a ?starter home?, planning to sell in five years and move up to a larger home. Other people plan to pay the home off and make it their retirement home. If you plan to only be in the home for a few years, you may want to consider an adjustable rate loan. If you plan to stay in the home for a long time, you may want to investigate a fixed-rate loan which will give you long-term payment stability.
Are you the type of person that is comfortable with risk? If you need to know exactly how much your payment will be from month to month or even year to year, you probably want a fixed ?rate loan. If you feel comfortable with risk, you may want to look at an adjustable rate loan ? the interest rate may be lower initially, but there's a chance that the rates could increase over time.
How much do you expect to make? You income potential is important. If you anticipate (reasonably) that your income with increase substantially, you may want to consider a graduated payment mortgage which allows the payments to increase over time.
Do you have cash upfront? If you have a substantial savings, you could put a large down payment, and opt for a shorter period of time on the loan ? perhaps a 15-year fixed rate loan. Within a relatively short amount of time, you'll have the loan paid off and you'll save thousands of dollars over the life of the loan in interest.
Each person has a unique set of circumstances that make one type of loan more ideal than another. When you talk with a qualified loan officer, you'll get lots of options. Carefully weigh your options against your circumstances, and you'll find the best mortgage for you in your new home.
When is debt ever a good thing? Debt is a good thing when it adds to your investment profile and when it gives you an opportunity to build your long term wealth. There are many ways you can use debt to secure your financial future.
Before you rush out to borrow money on your credit cards, take a moment to realize that some debt is good, and some debt are bad. Credit card debt will never improve your life, but there are several types of loans that will help you out long term financially.
The two best types of debt are mortgages and home equity loans. In the past, many home owners focused on paying off their mortgage as quickly as possible, and home equity loans were not even a consideration.
But times are changing. Nowadays, a mortgage or a home equity loan can add to your net worth. The key to this philosophy is using your mortgage or home equity loan to improve your assets.
Think about how most people hurry to pay off their mortgage. Usually, they take out a 15 year loan, or opt to include extra money monthly to be applied to the principle. The idea is the faster you pay off your mortgage, the more secure your retirement will be.
That will certainly pay off your mortgage quickly, but at what cost? If you are fairly young or middle aged, your retirement is far enough in the future that you do not have to be focused only on it. Instead, when you pay more each month, you have less available money from your paycheck.
Instead of paying off your mortgage, you could be using the extra money for investments. And when you use that money for investments now, you will be working towards your future and your retirement. You could be using that money to invest in stocks, or even take out another mortgage on an investment property.
Home equity loans will also provide you with cash, but it is not necessarily a good idea to use the cash for investment. When you compare the interest you would pay on a home equity loan against the return on investment, it does not really make sense. Instead, you could take the cash from a home equity loan to pay off high interest credit cards or loans. Again, you free up more of your monthly income to invest in other things.
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