5 Reasons a Home Mortgage Loan is not for Everyone
Each and every one of us dreams of owning a home one day. But what comes to the mind of many, they think of how to finance for these homes? Should you buy your living space or rent it? Can you pay cash for it or do you need a loan? One thing is clear, most of us, if not all, think of getting that home mortgage loan. While, as this is not a bad idea, home mortgage loans may not be the best option for every person out there in today's housing market. This article examines a few reasons why home mortgage loans may not be the best option to everyone. It will as well demonstrate reasons why mortgage loans may end up being more expensive in the long run for some people.
Renting fits your lifestyle
Maybe your lifestyle can benefit from living in a rental home or apartment. If you're apt to move in the next couple years or less, you may not want to get a home mortgage loan. Paying rent might make more sense. Or if you're looking to avoid any and all costs associated with owning a home like maintenance, yard work or property taxes then maybe renting is better for you. The rent vs buy debate isn't always a cut-and-dry answer for every potential home buyer.
Although may be enticing to many, it may turn out to be one of the dangerous financial decisions that a homeowner can make. At the first glance, paying off high-interest debt with what may seem as low-interest mortgage rate will appear like a good move, however, there are a number of potential problems involved. To start with you may be converting unsecured debt, like credit card, into a debt that is as matter of fact backed by your very own home. That means if in any case you fail to repay this mortgage loan you as well may lose your home. On the other hand it has been proved that once consumers have repaid their credit card debt, they are in most cases tempted to spend more and build up balances that they have problems repaying.
Moving to a loan with a longer term
While refinancing a home mortgage loan with a considerably lower interest rate may seem as one of the best way to save money, the cumulative overall cost of the loan may turn out to be more costly. If for example one has a loan with a 5 year repayment period, then decides to extend the repayment period to 15 years. It follows that you will have 10 more years to repay the loan; though monthly interest rate may seem lower the overall cost of your mortgage will definitely be higher.
Saving money for a new home
It is important for everyone to calculate how much refinancing a mortgage will cost and at the same time how much you will be saving per month. If for example it takes four years to recoup expenses of this refinancing and your plans are to move within three years then you are saving nothing and home mortgage loan may not be the best option for you.
Switching from adjustable rate to a fixed rate loan
Switching from an ARM to a FRM may be a better option especially when you intend to stay in your new home for ages. However if you are afraid of bad reputation then you ought to study the ARM terms careful refinancing. It is imperative to make sure that you are aware of what index ARM is tied to, how regularly can the loan be adjusted, and caps on the loan adjustments; the annual cap, first cap as well as the lifetime cap.
Having said that it is an individual option to weigh options available to him or her and make the appropriate decision on how to finance you mortgage. When it's time to make that decision, start with education and research. Download "The Only Mortgage Loan Guide You Need" at the button below. From FHA loans to 100% financing options, we want you to know your options in today's housing market.
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