You may be ready to buy that dream house of yours financially, but are you sure you have done all the research that is needed before making that decision? Investing in property, especially residential property is a big decision since you will be living in that apartment or house that you brought for the foreseeable future.
Here are a few common mistakes to avoid.
Affordability: Knowing what to invest doesn’t matter if you don’t know how much to invest. The biggest factor that should be taken into account is affordability. With so many banks and financial institutions offering attractive loan schemes and rates of interests, one can easily get carried away. But availing a substantial loan to buy that dream house of yours is just the first step. You should be able to figure out your spending limit and most importantly figure out how much you can comfortably afford to spend on housing per month, from your income. There are very easy to use mortgage calculators online which will help you determine the exact cost of your monthly investments.
Consider variations of expenses: Buying a house and maintaining the same house are two different costs altogether. You might be able to splurge a little more and buy that dream house of yours, but taking care of the fixed and variable expenses that you will incur will take a toll on your finances. One of the major components being the amount of tax which is to be paid on the property, other overheads fixed and variable amongst many other expenses. Home insurance is a key expense which will again add to the already long list of costs being incurred.
Adjusting v/s compromise: There is a glaring difference between the term adjustment and compromise. Adjustment will involve minor things, but compromising will make you question your investment at the end of the day. For example, if you are planning to have a big family, it just doesn’t make sense to buy a small house because right now it is cheap. A smaller apartment or house will only add to your troubles, instead an initial investment which might be tight on the budget can be made if this is the case. This is after factoring in all the other costs, plus the increased expenses because of the addition of one more family member.
You have to give this a fair thought to consider other factors like whether to hire and agent or not, is there a need for inspection though it is advisable that a thorough inspection be done before even making an offer. Have a broad vision of the type of house you want and plan accordingly, don’t be too picky for the market is limited and the demand is high. The more you wait, the higher are the chances of prices being hiked.
A reverse mortgage is a type of loan that allows homeowners to receive payments on their house as opposed to them making payments to the lender. At first glance, this option seems too good to be true. But, before committing to it, there are some nitty-gritty details that people must consider when opting for this type of financing. So, here is some information regarding the pros and cons to consider when getting a reverse mortgage.
Advantages
Disadvantages
A reverse mortgage is a loan that allows individuals older than 62 to improve their financial well-being. They can convert part of their home equity into lump sum cash, fixed monthly payments, or line of credit, according to their preference. The money can be used to pay for medical bills, in emergencies, or to pay off a mortgage. Here’s what you should know about reverse mortgages in case you’re looking for one.
How much can you borrow?
For reverse mortgages, the loan amount can’t exceed the value of the property against which it is borrowed. Federal regulations require lenders to ensure that the loan amount doesn’t exceed the value of the house by structuring the transactions accordingly. Additionally, these regulations state that the owner/borrower is not liable to pay off the balance amount in case it exceeds the property value.
How are reverse mortgages paid for?
A reverse mortgage is payable when the borrower sells the house, relocates permanently, or dies. Unlike forward mortgages, reverse mortgages don’t need the borrower to make any monthly payments. They are only liable to pay interest on the money received, which is rolled back into the loan balance. While the owner gets to keep the title to the home, their home equity reduces over the loan tenure.
Who can take a reverse mortgage?
This type of loan is ideal for seniors and retirees whose net worth comes mostly from the value of their home. Seniors who don’t qualify for a home equity loan or can’t refinance due to limited cash flow or poor credit can opt for reverse mortgages. Home Equity Conversion Mortgage (HECM) for purchase is a reverse mortgage that allows seniors to buy another property. That said, it is complex, and you should study the risk factors before getting one.
What are the risks associated with reverse mortgages?
Reverse mortgage scams are not unheard of. Unreputable vendors could offer to help seniors secure reverse mortgages by undertaking house repairs. They don’t provide quality results and get away with the homeowner’s money instead. For spouses living together in a home with only one spouse named as a borrower on a reverse mortgage, the other spouse can lose the home if the borrowing spouse dies first. Besides, reverse mortgage lenders charge fees and closing costs and may also charge mortgage insurance premiums for federally-insured HECMs.