Understand Debt: Mortgage — Starter Guide on The Basics of Home Owning 🏡
Mortgage is one of the bigger life steps: being a homeowner is a commitment and a responsibility that will stick with you for a good amount of time. ⏳ Yes, owning your own place is very rewarding and comes with numerous advantages. But it isn’t so simple, right?
The average loan repayment period is 25–30 years, so it’s not a surprise that this might be one of your biggest life decisions to make. 🤔 Don’t be afraid of it, but be cautious. Reevaluate your financial situation: do you have money for down payment? How much will you have left on your account? Do you have a sufficient emergency fund in case you lose your job? Are you aware that you’re risking losing the appraised property if unable to pay?
Of course, your life is going to change for decades! You’ll be paying significant payoffs each month, so make sure you know how much you have left for other necessary costs in order to live a comfortable life. 🏡 Now that you’re aware it isn’t just sunshine and rainbows — we’re here to help you debunk the mystery and make you a little bit more familiar with this financial opportunity.
“Owning a home is the most desirable thing for all, it acts as your fiscal wealth and mental security.”
See The Benefits 🎉
Yes, it’s scary to make such a big step — but it’s also very rewarding. Use mortgage as a tool to grow your wealth! Instead of renting a place and paying money to a stranger, you can use a mortgage as a tool to invest in your own wealth. We are living in times when it’s almost impossible for most people to buy a house without getting a loan. Don’t be afraid of debt, but learn how to use it to your advantage. If the market value of your property increases, you will be conserving value for your kids and other generations. And the cherry on top? Having your own place will also enable you to do any renovations and decorations you dreamed about!
Be Prepared 💡
Mortgages are very dependent on your personal factors, such as credit score, assets or type of employment. Depending on where you live, there might be different laws regarding your attainable mortgage value, your maximal monthly payments, your minimal down payment and you should also look into what property it might be appraised with.
Some useful phrases to get familiar with are:
📈 Adjustable Rate — when the interest rate changes depending on the market.
🏡 Appraisal — estimating the value of your new home done by independent contractors.
💸 Assets — things you own that have cash value, to verify that you’re well prepared for mortgage and its risks.
💰 Down Payment — to qualify for mortgage, you need to be able to pay a certain amount of money as the purchase price.
📎 Preapproval — first step into mortgage! A document which specifies how much of a loan you can afford.
🤑 Closing Costs — fees paid to lender for finalizing the offer.
💡 LTV — Loan To Value Ratio is calculated before approving the mortgage, because the lending risk needs to be examined. It’s dividing Mortgage Amount by the Appraised Property Value. The higher the ratio, the bigger the risk.
Master The Journey 💪
There isn’t an ultimate guide for everyone, we are individuals, and our life situations are unique. But you can always be more prepared than you were yesterday! Here are a few simple tips that will help you along the way:
First Step: Meet Your Advisor 🧑🏼💻
🙇🏼 Be Rational. Foresee the future and make a solid plan: count with every penny you need to spend for your living. Mortgage payments won’t be all that’s left — housing costs also include insurance, utilities and other bills.
🔎 Beware of Invisible Fees. Your decision making can’t solely depend on the interest rate! Don’t be fixated on this one variable: each bank has other costs to consider, that are usually hidden — such as maintenance or execution fees.
🏦 Compare Banks. Don’t be afraid to get out of your comfort zone to get the best deal possible. Often, people are too fixated on their current bank providers or places they are comfortable with: analyse all the offers!
Second Step: Analyse & Apply 📝
⚙️ Prepare to Get Reviewed. All of your important information will be thoroughly analysed by a bank specialist in the reviewing phase. It’s a necessary step to determine the offer, conditions and your credibility.
📎 Get Your Docs Ready. If you’re eligible for the mortgage, there might be additional documents you need to present, such as tax statements or other financial history.
✅ Set Payment Terms. In the last phase, you will get to a screening process resulting in setting the optimal loan & monthly payment size. It’s the last check by your bank that you’re suitable to pay off the loan in the long run.
✍🏼 Sign The Documents. Don’t rush this step and take your time to properly read through everything you’re about to sign. If you’re overwhelmed, make sure to send these documents to a specialist.
Step Three: Enjoy Your New Home 🔑
But don’t forget — even though the most difficult financial step of your life is accomplished — you shouldn’t stop educating yourself in your financial health. Would you like to master your finance? ✅ Try out our free trial!