Real Estate Ownership is the American Dream with Large Debt Attached
Real Estate Ownership is the American Dream with Large Debt Attached
The heart of the American Dream is home ownership. You begin by making a conscious decision toward home ownership. This is just the first step in the process.
Of course, for you to reach this goal, you must find a way to pay for your asset. Since most people are unable to save enough to pay for their first home outright, they must find a means of financing it. There are several things you should consider before you start this process:
1. How long have you been employed.
2. Have you created a good credit history.
3. Do you pay your bills in a timely manner.
4. Can you afford to increase your debt level at this time.
5. Have you obtain a current credit report, reviewed the information, and believe it is accurate.
After you find your first property, you must consider how to finance it. Generally you need a Mortgage. This is a loan from a bank or other lending institution. The loan will consist of a principal and interest payment. The principal you pay monthly reduces the balance of your loan. The interest is your cost of borrowing the funds and will decrease slightly each month.
The cost of this debt is truly huge. If you borrow $120,000 with a thirty year fixed rate mortgage at a modest seven percent, you will pay $167,000 in interest over the life of this loan. While it is true you will pay some of the interest with future dollars when the dollar will be worth less (inflation), you still have committed to paying an enormous amount of interest for the privilege of home ownership.
Do your due diligence when choosing your mortgage vehicle. There are two basic choices – fixed rate and variable rate mortgages. Within these categories are other options for you to consider. The amount of interest you actually pay varies while your expenses are continuing to rise.
Weigh the pros and cons of each mortgage type before you decide. I suggest you take the time to do this research and reach a tentative decision before you find the property you just must have. Once you find the property, emotion takes over and you may not make the best decision in your excitement.
Two issues to consider before moving forward are:
1. Fixed or adjustable rate mortgages
2. How much financial risk are you willing and able to take on?
If you take an adjustable rate mortgage, you are gambling more than someone who stays with a fixed rate mortgage. You need to consider :
1. Job stability
2. Income stability
3. Interest rates
4. Can you afford the maximum payment based on the lifetime cap on the adjustable rate mortgage.
5. Your stress level. Only take on what you can deal with comfortably.
Be conservative in your choices for your first property and the vehicle you use to finance it. When you are ready, you can use a Mortgage Payoff vehicle to eliminate your debt much sooner. This will put you in a position to buy more/larger properties in the future.
Nancy Woodward is a Real Estate Professional and business writer. Her online newsletter provides Mortgage and Real Estate Information, Resources and products for your financial prosperity.
MillionDollarReferralLady’sBlog
The heart of the American Dream is home ownership. You begin by making a conscious decision toward home ownership. This is just the first step in the process.
Of course, for you to reach this goal, you must find a way to pay for your asset. Since most people are unable to save enough to pay for their first home outright, they must find a means of financing it. There are several things you should consider before you start this process:
1. How long have you been employed.
2. Have you created a good credit history.
3. Do you pay your bills in a timely manner.
4. Can you afford to increase your debt level at this time.
5. Have you obtain a current credit report, reviewed the information, and believe it is accurate.
After you find your first property, you must consider how to finance it. Generally you need a Mortgage. This is a loan from a bank or other lending institution. The loan will consist of a principal and interest payment. The principal you pay monthly reduces the balance of your loan. The interest is your cost of borrowing the funds and will decrease slightly each month.
The cost of this debt is truly huge. If you borrow $120,000 with a thirty year fixed rate mortgage at a modest seven percent, you will pay $167,000 in interest over the life of this loan. While it is true you will pay some of the interest with future dollars when the dollar will be worth less (inflation), you still have committed to paying an enormous amount of interest for the privilege of home ownership.
Do your due diligence when choosing your mortgage vehicle. There are two basic choices – fixed rate and variable rate mortgages. Within these categories are other options for you to consider. The amount of interest you actually pay varies while your expenses are continuing to rise.
Weigh the pros and cons of each mortgage type before you decide. I suggest you take the time to do this research and reach a tentative decision before you find the property you just must have. Once you find the property, emotion takes over and you may not make the best decision in your excitement.
Two issues to consider before moving forward are:
1. Fixed or adjustable rate mortgages
2. How much financial risk are you willing and able to take on?
If you take an adjustable rate mortgage, you are gambling more than someone who stays with a fixed rate mortgage. You need to consider :
1. Job stability
2. Income stability
3. Interest rates
4. Can you afford the maximum payment based on the lifetime cap on the adjustable rate mortgage.
5. Your stress level. Only take on what you can deal with comfortably.
Be conservative in your choices for your first property and the vehicle you use to finance it. When you are ready, you can use a Mortgage Payoff vehicle to eliminate your debt much sooner. This will put you in a position to buy more/larger properties in the future.
Nancy Woodward is a Real Estate Professional and business writer. Her online newsletter provides Mortgage and Real Estate Information, Resources and products for your financial prosperity.
MillionDollarReferralLady’sBlog
posted by Nan at 2:23 PM
0 Comments:
Post a Comment
<< Home