Pros and Cons of Getting a Mortgage
It is a fact that owning a house becomes easier for low to middle-income earners through a mortgage application. However, securing a mortgage comes with both advantages and disadvantages.
If you are looking to apply for a mortgage and purchase a house for the very first time, you need to make sure you understand what you’re getting into. Let’s take a look at the advantages and downsides of applying for a mortgage.
Cost-effective borrowing – first and foremost, a home mortgage offers lower interest rates compared to other types of loans. Furthermore, these mortgages sometimes come with payment schemes that are flexible.
Tailored for you – mortgages come in different forms and you can choose from a number of options the one that best suits your requirements and financial condition. There is a fixed rate, the adjustable rate, and discount mortgages, just to name a few. What you need to do, however, is to determine how much money you need to loan. You also need to tell the lender how much you can afford in terms of your monthly payments. A Newport Beach real estate agent should be able to assist you in the process.
Long-term options – if paying a hefty amount every month is something that you think you cannot absorb, mortgages can be set with a long-term payment scheme. Believe it or not, you can stretch your mortgage for up to 30 years. This means you will have lower monthly payments that are easy on your finances.
Consider it an investment – in fact, you can also consider it as an investment to some extent. Compared to renting a property where you pay a monthly rent but not really owning the property in the long run, a mortgage prompts you to pay with the end goal of acquiring the property once the mortgage is paid off.
You will have debt – a long-term mortgage is considered a debt, even if the finish line means getting to own the house. It is something that you need to save up for every month for several years.
There are risks – in the event that you fail to pay your loan, there are a lot of risks that will come your way. The biggest of them all is the possibility of losing your property altogether; not only your house but also the payments that you have given the lender through the years.
The loan is secured – like it or not, the mortgage is secured against the house you are looking to buy. Default the loan, and you will likely lose the property. In the market for Newport Beach real estate, contact a trusted real estate agent today
Is A Reverse Mortgage Right For You? 5 Ways to Tell
For senior citizens, one of the biggest worries and challenges of living out their retirement can be finding a source of income to maintain a comfortable lifestyle. Pensions and social security benefits aren’t always sufficient to cover expenses, and downgrading your lifestyle to scrimp and save probably isn’t how you pictured spending your golden years. One investment product you’ve probably heard a lot about as a potential solution for this situation is the reverse mortgage.
In a reverse mortgage, you take out a loan using the equity in your home as collateral. You retain ownership of your home and don’t have to make payments on the loan, and when you move out, pass away, or sell your home, the loan is typically paid back through proceeds from the sale of the property. Reverse mortgages are insured by the government, so if the selling price isn’t enough to cover the loan balance, your heirs aren’t liable to cover the difference. For seniors looking for regular cash flow to meet their immediate needs, a reverse mortgage can be a great option to convert the equity in their home into money they can use to enjoy a good quality of life. Is a reverse mortgage the right option for you? Here are five things to ask yourself before you apply for one.
Do you qualify?
To get a reverse mortgage, you have to be at least 62 years old, own your home outright (or be able to pay off the remaining mortgage balance with money from the reverse mortgage), and live in the home you’re taking the reverse mortgage out on. Most types of homes, including condominiums and manufactured houses, are eligible for a reverse mortgage.
Do you need the money right now?
Reverse mortgages are intended to help you get money you need for immediate concerns, like health issues, monthly bills, major unplanned expenses, or to enjoy a better quality of life. If you already have the means to adequately support your day to day lifestyle, you might want to consider different financial products, like short-term investments, to supplement your income. You’ll also want to decide on the best way to receive the money from a reverse mortgage if you do decide to get one, as you can get it in several different ways, including monthly payments, as a lump sum, or as a line of credit you can draw from.
Is there a better option, like selling your home or taking out a loan?
There may be other ways to use the equity in your home to get money you can spend now. If you’re willing to move and your home has appreciated in value since you purchased it, you might want to look into selling it. You could move into a more affordable place and pocket any extra money you made off the sale. If you have a large home, you could look into the possibility of renting out extra rooms for a regular monthly income. You might also consider taking out a standard home equity loan, if you need a large amount of money for a major one-time expense and have good credit and the means to pay the loan back.
Do you want to pass on your home free and clear to your children?
If it’s important to you to be able to pass along your family home to your children or grandchildren with a clean title, a reverse mortgage may pose some difficulties, but it’s still possible. Normally, a reverse mortgage is paid off by the eventual sale of your home, but your estate can take up to twelve months to find other ways to pay off or refinance the loan if they want to retain ownership of the property. It might also be the case that you don’t have any descendants who need or expect to inherit your home, in which case this is nothing you have to worry about at all.
Have you found a reputable lender and gotten financial counseling?
There are different types of reverse mortgages and a wide variety of lenders who provide them, and it’s important to find a reputable lender that charges reasonable fees and will help guide you to a product that makes sense for you and will provide benefits for your life—not just the one that makes them the biggest commission. It’s also required, as part of the reverse mortgage application process, to meet with a financial counselor approved by the Federal Housing Administration.
For aging homeowners, a reverse mortgage can provide the solutions to many kinds of financial difficulties, but getting one is a major decision that requires lots of planning, forethought, and homework. Make sure you take the time to think about all aspects of your situation before you apply and you’ll be able to feel confident that if you do opt to go through with a reverse mortgage, you’re making a wise and well-considered decision.
How to Get the Best Mortgage Rate?
We don’t need to present a survey result to prove that most people like to have their own house one day. But unfortunately, the cost of owning a Los Angeles Real Estate property is out of reach of most homebuyers. The average cost of a regular house is more than $280,000. For many, saving for this amount can be very hard.
The good thing is there is another way to buy a house without paying the full price of the house one-time. Getting approved for a mortgage is the best way to own a house in “installment basis”.
However, keep in mind that a mortgage is huge financial responsibility. The repayment can take up to 30 years, which is almost half the average lifespan of many Americans. Because of this, the responsibility for paying a loan can also be very difficult. To make it a little bit easier, here are some ways to get the best mortgage rate.
Improve your credit score:
Your credit score is the most important determining factor as to what interest will your mortgage be tied-up with. For instance, if you have a credit score of 760 and up, a 30-year mortgage contract would pay $164,000 in total interest which is about $33,000 less than what someone would get if he has a mediocre credit rating.
Good employment record:
If you have a plan to buy a Los Angeles Luxury Property, you need to stay with your current employer for at least two years. Changing companies very often is not good for your credit-worthiness. Also, make sure that you have some copies of your payslip just in case the lender will ask for it.
Put big cash down payment:
You will receive a lower loan interest if you will put more in down payment. Generally, lenders require their borrowers to put 20% of the total value of the house as down payment. If you put more, the interest rate on your loan will be smaller. If you put less, the interest rate will be higher.
The shorter your loan repayment scheme is, the more savings you can get. If you will take the longer route, say the 30-year fixed rate mortgage, you will find out that you could have saved more if you choose the shorter mode of repayment.
Don’t settle for the first lender that will knock on your door. Apply for a mortgage to 3-4 different lenders. Once approved, compare and contrast the offers. Choose the company which offers the lowest interest rate and has a solid lending background.
I hope this Web-Page will help you in getting a mortgage. If you have any suggestion to add then please let me know in comment section.