Tips on How to get the best Mortgage

Should Husband and Wife share mortgage Expenses?

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  • It's the Man's Responsibility
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Owning a home is a big achievement in any one’s life, and often comes with excitement and a general feeling of satisfaction. The kind of home you own will make a huge statement on your social status. This is why it is normal to feel the need to impress when it comes to your choice of home. There are many strategies you can employ to add yourself to the class of property owners, but today we shall focus attention on Mortgages.

What is a mortgage?

As you decide to take a mortgage it is very crucial that you fully understand all aspects of the transaction because it is a debt that you are likely to service over a long period of time.

In simple terms, a mortgage is a loan you obtain from a financial institution such as a bank in order to finance the purchase of your home. Like other kinds of loans, a mortgage is made up of several components such as;

The principle- which is the sum of money borrowed to buy the home.

Interest- this is often expressed as a percentage called interest rate. It is the price you pay to the lender for obtaining the money, and is often calculated as fraction of the sum that you borrow. (Think of it as the lenders profit from the transaction). In addition, the mortgage will include taxes, insurance and some additional fees such as loan processing or loan administration fees. These can sometimes be called junk fees.

The Collateral- this serves as the security to the lender. In the event that you fail to repay the debt, this is what the lender will sell off to recover their money. In most cases the home you buy is collateral to that loan, so that if you default, the lenders has the right to reposes your home, and sell it off to cover the debt.

There are two types of loans you are likely to find; a fixed rate mortgage (which offers the same interest rate throughout the life of the loan) and an adjustable rate mortgage (whose interest rate keeps fluctuating throughout the life of the loan). Each type has its Pros and cons and it is important to carefully think over them before you make a decision.

What to Consider

A mortgage is a big debt, which if not handled with care can lead to bankruptcy. Lack of adequate information is the leading factor towards making mistakes that can make you pay much more than you should. It is therefore important to make adequate research before you engage a lender. Never be in a rush to close any deals without adequately scrutinizing all terms and conditions. Here are some tips you should keep in mind as you prepare to secure a mortgage;

Determine how much you can afford

You are the boss of your finances; you are therefore in the best position to determine how much house you can afford. The commonest mistake that most defaulters make is to succumb to social pressure regarding the size and type of home they should own. The desire to impress peers can be overwhelming, but don’t let it blind you to your true financial capabilities. The other challenge is to let the bank determine for you how much loan you can take. Remember that financial institutions are in the business to maximize their earnings and not necessarily to find what is best for you. Keep in mind that on top of the monthly deposits you will be required to make towards repaying the loan; you have additional monthly expenses such as utility bills and other routine expenses to take care of.

Opt for the fixed-rate loan

A Fixed rate mortgage has the same interest throughout. It therefore eliminates surprise in fluctuation of interest repayment. It offers better planning and puts your mind to rest ounce and for all in regards to how much interest you will pay. On the other hand an adjustable rate mortgage starts with a lower short term interest rate. However After the initial period, the rate will keep fluctuating throughout the rest of the loan. This means that when interest rates are low, you will pay less, but if they are high, you might end up paying more each month.

Consider mortgages with shorter payback period

Most mortgages have long periods of payback time; typically about 30 years. But you have options of shorter pay back periods of 10, 15 or 20 years. You will pay much less interest over the life of these shorter term loans, but your monthly payment will be higher than with a 30 year mortgage. Assess your finances and make a decision that will not drive you to financial stress.

Choose the right lender

Finding the right institution from which to borrow requires you to fully understand your interests. Ounce you know exactly what you are looking for, the next step is to find a lender who will give due importance to these interests. Never be in a rush to settle for the first lending institution that offers you a mortgage. Carefully research and compare interest rates and other administrative fees, because they vary widely between lenders. Interest rates affect your loan amount and monthly payments. Choosing a good rate will go a long way in providing peace of mind. Remember that interest rates vary depending on current market conditions and other economic factors. Take some time to compare various offers to make sure you are settling for the best deal.

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Should husband and wife share mortgage expenses?

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