At BMG Money, we care about the long-term financial welfare of our clients. Buying a home is one of the smartest financial decisions a person can make, and yet for some reason, it seems that more and more people are putting off this decision. In the past, it was fairly common for families to buy their first home soon after marriage. Today, however, many are putting off buying their first home until they’re in their 30s or 40s.
One major problem is that most people simply think that they can’t afford to buy a home. In some ways, this makes sense as the statistics continually show that owning a home costs more per month than renting a similar property. The problem is that renting is essentially a waste of money. Even if you do end up paying more per month on a home you own, the fact is that you’re putting your monthly housing costs to work for you instead of simply sending them off to your landlord.
Although it will generally take you several decades to fully pay off your mortgage, the fact is that all of that money you spend will eventually provide a real tangible result. For this reason, purchasing a home is something everyone really needs to strongly consider.
The Importance of a Good Mortgage
No matter whether renting or buying, it’s always a good idea to ensure that your monthly housing expenses don’t exceed one-third of your total income. With this in mind, you can then begin looking into mortgage options that fit these requirements. Although it may take speaking to numerous lenders, the odds are fairly good that you’ll be able to find a loan that works for you and allows you to achieve the dream of owning your own home.
However, it is important to pay attention to the type of mortgage. In most cases, a 30-year fixed rate mortgage is your best option. Interest rates are generally quite low at the moment, and this type of mortgage allows you to lock in that low rate for the entire life of your loan. As well, it also simplifies things for you by making easier to see exactly how much you’ll have to pay over the life of your mortgage.
The Impact of Interest
The problem with a 30-year mortgage is that you’ll end up paying a huge amount in interest before the house is finally paid off. In fact, it’s likely that you’ll end up paying more than double the total cost of the house due to interest. One easy way to lower the amount of total interest you have to pay is to put down a big of a down payment as you possibly can, preferably at least 10 percent.
Another great way to lower your total interest payments is to pay off your loan bi-monthly instead of just once a month. By doing this, you’ll actually end up making the equivalent of 13 monthly payments each year instead of 12. Depending on your interest rate, this could easily save you well over $50,000 in interest over the life of your loan.
At the end of the day, buying a house almost always makes smart financial sense. However, it is still important that you put some thought into your mortgage and your payments. By doing so, you could end up saving yourself tens of thousands on the home of your dreams.