A home purchase gives you personal benefits such as a sense of investing in your community and pride for achieving the dream of homeownership. There are some strong financial benefits as well, especially the tax savings you may enjoy. Interest payments on a mortgage are typically tax deductible (consult your tax advisor for more information). As you continue to make mortgage payments, you’ll build home equity, as opposed to paying rent to someone else.
The decision to rent or buy a home differs for everyone, as there are benefits to both. Buying a home could be a better deal for you depending on how long you plan to live in your home and the loan you choose.
Once you’ve negotiated a good rate with a lender, you’ll have a window of time to lock in the rate. If you’re interested, make sure you commit to the mortgage within the window, or you risk losing the rate you negotiated so hard to get.
Compared to the traditional 30-year mortgage, a 15-year home loan costs you more each month, but you’ll pay less in interest over the life of the loan. If you’re not planning to be in the home for very long, it’s probably not worth the higher monthly payments for a 15-year term. If you’re planning on staying in the home for a long time–and especially if you’re eager to be debt-free–a 15-year mortgage could be a good option.
Not to worry – most lenders now make it easy to pay your mortgage online.
If your down payment is less than 20% of the home value, you’ll need to pay Private Mortgage Insurance (PMI) on top of your monthly mortgage payments. Once your principal balance reaches 78% of the original value of your home, though, you’re entitled to stop paying PMI.
You can, but your mortgage may come with prepayment penalties. Before committing to a mortgage, negotiate with your lender to eliminate prepayment fees if you can. That way, you can put any extra money toward your mortgage payment, with a note that you want the extra to go toward your principal, not interest. You’ll build home equity faster.
Mortgage points usually cost 1% of the mortgage value. Each point you buy will generally knock 0.25% off your interest rate.
Get on the phone with your mortgage lender and explain your situation. If you’re experiencing a job loss, health crisis, bereavement or other hardship, you should be able to negotiate what’s called temporary mortgage forbearance. This will allow you to temporarily lower–or even suspend–your monthly loan payments.