Owning a home can be the biggest and sweetest dream one can possess. But what if that very home can give you surplus cash to use and grow it manifold somewhere else. Taking a loan against your home is one of the most important decisions you can make. This article deals with the smart tips that may help you finalizing this decision and you end up selecting the right mortgage or home equity loan for yourself.
- Mortgages are not commodities: If you try to deal with the mortgage loan as you deal in equities and commodities, you are going to be disappointed from the start. The secret to striking the right deal here is to find a trustworthy partner who can help you navigate a complex transaction by his honest advice and experienced support throughout the entire loan process.
- WWW cannot be the one stop shop for all solutions: Mortgage loan is not like buying a music player or biding on sports equipment or ordering some books, we would advise you to not take this decision lightly. This does not at all mean that you should rule out internet from the list. Many reputed sites help you find interest rates, calculate your potential loan and provide other useful information on the subject as well.
- Interest-only loans are not recommended: In this kind of loans, you just pay the interest and if you only pay the interest, you do not acquire any equity or ownership in your home and hence the purpose is defeated most of the times. Interest only loans are an asset when you plan to exit in a short span of time.
- Figure out the applicable fees: Make sure to figure out the exact and the types of fee the company is going to charge you. However, many of the fees are unavoidable, but still these structures vary from firm to firm and you can save money by investigation. You should check especially about the application fee, loan processing fee, value appraisal or title insurance fee, inspection, review or warehousing fee. You should also check if there is any penalty if you want to pay the loan in advance.
- Floating rate loans should be avoided: These loans generally appear more attractive in comparison to the fixed rate loans because of the advertised lower interest rates. But these loans are completely market linked. Interest rates can change any moment. You should opt for adjustable rate loans only if you are sure that interest rates have no chance of going up, the loan ceiling on the floating rate is below the current fixed rates, or you want to sell off your home before the first interest rate revision.
Warnings that should be kept in mind before signing the deal with moneylender: Many cases have been found where people end up finalizing a completely different deal from the one that was promised to them. They do not bother about the last minute changes that are projected as mandatory by the broker and they end up crying in the end. You should understand that you are the decision maker and you do not have to think twice before walking away. Given below is a list of warnings that you should always keep in mind before fixing the deal:
- The loan representative should not encourage you to borrow more money than you need.
- It is not advisable to either overstate your income or understate the status of current loan liabilities on you.
- You should not sign any blank documents and you should get copies of all the documents involved in the deal.
- You should also make sure that the loan representative should be organized, and true to his words.
- You should not be carried away by the additional packages that he offers at the last minute.
- You ought not to deed your property to anyone.
- You should be entitled to get the exact same deal he promised you.
Just make sure that you go ahead only if you are sure about the mortgage firm or representative. The more momentum builds, the more difficult it is to back out always and this is the golden rule on which dishonest lenders bank their deals.
Figure out if you can avoid paying for the mortgage insurance: The mortgage insurance depends on the dept-to-home ratio. The mortgage insurance is for the protection of the lender and not you. Hence, you should avoid paying for it. Most of the loans waive off the insurance if your dept-to-home ratio is low. Still, you should keep this in mind and check during the documentation.
- Do not opt for the minimum loan payment: There are certain options available in the market that offers you to pay even less than your interest amount. But in this scenario, you might find yourself in a situation where you owe more to the bank than the exact cost of your property in a few years of time. You should at least opt for an installment that is equal to the interest amount. Making regular payment including both interest amount and the principal amount is most advisable. They enable you to lessen the loan on a regular basis and you never come under the pressure of economical burden.
- Payment should be on time: You are advised to make your payments on time and over a span of time, try to pay more than usual so that the principal amount could be decreased further.
We would like to add that the best option available might vary from person to person and thus it is advisable to personally check the best available mortgage or home equity plan based on your needs. We sincerely hope that the above given tips would assist you in making the right decision for yourself.