Ways You Can Lower Your Mortgage as a First-Time Home Buyer
Are you considering buying a home? One of the best options to consider is taking a mortgage.
While you have other bills to clear, a mortgage can become expensive and probably take a toll on you.
However, that should not discourage you from getting a mortgage.
Are you wondering how you can cater to other living expenses while paying a mortgage comfortably?
Here are a few ways to lower your mortgage costs as a first-time homebuyer.
Pay a Large Deposit
If you have the financial ability to pay more than the usual 20% of the total price, you will have a lower mortgage payment monthly. There are so many benefits or making more than the typical down payment.
For example, if you pay less than 20% of the total amount, you have to make monthly payments to pay private mortgage insurance (PMI).
The PMI is included on top of your regular mortgage payment. What’s worse? The PMI doesn’t result in any form of compensation.
The insurance covers only the lender if you’re unable to pay. So, paying at least 20% or more exempts you from incurring these insurance expenses.
The more the down payment, the less you will have to pay back. You will have a lower interest rate and gain leverage if you’re trying to compete with other prospective buyers—besides lenders like borrowers who take a lower mortgage.
Paying a larger down payment will allow you to attract buyers with low interest rates.
Pick an Interest-Only Mortgage
Once you have a plan, some lenders will give an interest-only loan (I/O) offer instead of paying the balance immediately.
The offer occurs in two phases. In the first stage, you only have to pay mortgage interest and then clear the principal amount with interest in the second phase.
Suppose you have a 20-year plan. You won’t spend much on the first five years.
However, for the remaining 15 years, you have to pay the rest of the amount.
This is a temporary solution that allows you to get back on your feet first before resuming the regular payment schedule.
Rent Out a Portion of Your Home
If your house has some extra space, probably in the basement, renting it out can lower the amount of your payment.
Even if the tenant pays just $450 per month, you can use it to reduce your mortgage bit by bit until you complete your home loans.
Make sure you collect a security deposit from your tenant before moving in. This amount covers damages that may exceed standard wear and tear.
If you collect a sufficient security deposit, you can use it to cut down your mortgage costs.
The tips mentioned above will help you reduce your payment by a significant margin.
The choice of lowering technique depends on whether you’re seeking a short or long-term solution.
Category: Housing
