Posts

Graduating From College? 3 Things You Need to Know About Mortgages and Student Loans

Graduating From College? 3 Things You Need to Know About Mortgages and Student LoansAre you thinking about buying a new home using a mortgage loan? If you’ve just graduated from college, you’re probably wondering how your student loans will impact a mortgage and what your options are. In today’s post we’ll share three things that you need to know about mortgages if you’re still working on paying off your student loan debt.

#1: Yes, Your Student Loan Will Affect Your Application

You might as well embrace the fact that your outstanding student loan is going to cause some questions to be asked during the mortgage application process. Mortgage lenders have a responsibility to understand the risk involved in lending a significant amount of money to you. And because of this, any mortgage provider is likely to dig into your financial background to ensure that you are responsible and can afford to make the mortgage payments.

Don’t take it personally. In fact, it’s best to be up front about your existing student loan or other debts and your plan for managing them.

#2: It’s All About Your “DTI” Ratio

Your debt-to-income ratio is going to be a significant factor in the success of your mortgage application. This figure helps to determine how much money you need to send out to balance your debts each month versus how much you’re bringing in from working. If this ratio is too high, it’s a signal that you may not be able to juggle all of the payments you’re responsible for making. Also, keep in mind that over time, your job and income situation will change and this can affect your DTI ratio as well.

#3: Missed Payments Can Cause Serious Problems

Finally, you’ll want to ensure that you don’t miss any student loan payments. Even one missed payment – for any reason – can cause significant damage to your credit rating or FICO score. Successfully managing a higher-than-normal debt load means being strict with your budget and responsible with your payments. If possible, try to have your student loan payments taken out from your bank account automatically. That way you won’t forget or miss the payment deadline.

While it may be a challenge to manage multiple types of debt, it’s not impossible. Juggling student loans with a mortgage can be done and offers the benefit of building your net worth while paying off your past loans. For more information about getting a mortgage when you have student loans, contact your trusted mortgage team today. We’ll be happy to share our insight and make recommendations that fit your situation.

/by

3 Reasons to Hit the Accelerator on Your Mortgage Payments – If You Can Afford It

3 Reasons to Hit the Accelerator on Your Mortgage Payments If You Can Afford ItDoes the thought of repaying your mortgage for the next twenty-plus years leave you feeling a little down? Whether you’ve had your mortgage for weeks or years, accelerating your payments is an excellent option that can help get your mortgage fully paid off in a shorter time frame. Let’s explore three great reasons to accelerate your payments so that your mortgage debt is paid down faster.

You’ll Be Debt-Free That Much Faster

It may seem obvious, but it’s worth stating that you’ll be debt-free that much quicker if you accelerate your repayment schedule. Every extra payment you make against your mortgage debt builds the amount of equity you own in your home. So not only are you becoming more debt-free with each payment, but you’re also building your net worth. And while it’s true that you might only shave a year or two off of your 25-year mortgage period, being debt-free faster is still worth the effort.

You’ll Pay Less Interest

With most mortgages, any extra payments that you make will go straight towards your ‘principal’ balance. Getting the principal paid down faster means that you’ll end up paying less in interest than if you hadn’t. If you consider that every year you shave off of a 20-year amortization period is a full year of interest that you won’t have to pay, it adds up. Note that if you have an existing mortgage agreement, you’ll need to check the terms to determine the rules around extra principal payments.

You’ll Have More Financial Freedom

Finally, the faster you get your mortgage paid off, the more financial freedom you’ll have. The equity and credit you’ve built over time will also provide you with some options. You can invest in buying an investment property, or in taking out a line of credit to renovate and upgrade your current home. If the numbers make sense, you can also borrow against your home equity to invest in the financial markets. This will diversify your investment portfolio and expand your net worth.

As you can see, it’s well worth the financial investment to accelerate your mortgage repayment. If you can afford it and it won’t significantly lower your quality of life. If you have questions about a mortgage new or existing, contact our team of mortgage professionals. We’re happy to help.

/by

Should You Make Extra Mortgage Payments Toward The Principal Of Your Home?

Should You Make Extra Mortgage Payments Toward The Principal Of Your Home?If you have recently purchased a house, you have probably taken a look at your mortgage statement and noticed that the majority of your first few payments are going toward interest. You do not start paying down a significant amount of the principal until later in your mortgage cycle. If you start to make more money, you might be interested in making additional payments toward the principal of your home. Is this a smart financial move? There are a few important points to know.

You Can Cancel Your PMI Sooner

One of the major advantages of making additional mortgage payments toward the principal is that you can get rid of your private mortgage insurance sooner. If you put less than 20 percent down on your home, you might be required to purchase mortgage insurance. You will need to keep paying for mortgage insurance until you reach 20 percent equity. If you want to get rid of your PMI more quickly, you may want to make additional payments to get to that 20 percent mark sooner. 

You Save Money On Interest

Of course, one of the biggest advantages of making additional mortgage payments towards your principal is that you will not have to pay as much money in interest. Interest is calculated as a percentage of the remaining balance of your loan. If you make extra mortgage payments, you can shrink the remaining balance, helping you save money on interest. 

You Could Make More Money Elsewhere

On the other hand, you may not want to make additional mortgage payments if you can use your money to make more money elsewhere. If you have a very low-interest rate on your mortgage, you might be better off putting your money in the stock market, where you can generate a greater return. Of course, the stock market is also a very volatile place, so you need to be careful about how you invest your money.

It Depends On Your Goals

In the end, you need to think about your financial goals to figure out where your money would serve you best. If you have extra money to put toward your mortgage, you could pay off your house more quickly. Or, you could put it in a retirement account. Think carefully about what works best for you. 

 

/by

Make One Extra Mortgage Payment Every Year To Save Big

Make One Extra Mortgage Payment Every Year To Save BigWhen you buy a home, you probably have a budget you will try to stick to. Many people choose a 30-year fixed mortgage, and by the time you pay off the home loan, you should own your home outright. At the same time, you might be thinking about paying off your mortgage more quickly to save money on interest. Even making one extra mortgage payment per year can provide a number of significant benefits.

You Can Build Up Equity Faster

One of the first benefits of making an extra mortgage payment every year is that you can build up equity faster. If you make an extra mortgage payment, that payment should go directly toward the principal. This means you don’t have to worry about paying down any interest with that extra mortgage payment, allowing you to build up equity in your home more quickly. 

You Save Money On Interest

If you make an extra mortgage payment, you pay down the principal more quickly. This means there is a lower remaining balance on which interest might accrue. Even making one extra mortgage payment every year can add up to tens of thousands of dollars in interest saved at the end of the loan. 

You Free Up Financial Resources Down The Road

If you make one extra mortgage payment every year, you could pay off your home loan years in advance. This means you don’t have to worry about making mortgage payments down the road, which can free up financial resources to cover other expenses. For example, you might be able to use the money you would have put toward your mortgage to put a child through college or retire early. Your savings will increase exponentially. 

Consider Making One Extra Mortgage Payment Per Year To Save Big

If you stay in your home for 30 years, there is a chance your income will go up even though your mortgage payments stay the same. Therefore, you may be able to afford to make an extra mortgage payment per year. Making only one extra mortgage payment every year can add up to big savings very quickly. 

/by

Save Some Additional Cash with Our Guide to Lowering Your Monthly Mortgage Payment

Save Some Additional Cash with Our Guide to Lowering Your Monthly Mortgage Payment If you are like many other homeowners, your home mortgage payment is the single largest expense in your monthly budget. This is a fixed expense that you will typically be responsible for until your loan is paid in full or until you sell your home, and you may have a 15, 20 or even 30 year term on your mortgage.

If your home mortgage payment has become unaffordable or burdensome for you to manage with your current financial situation, rest assured that you may be able to save some additional cash each month without selling your home. Refinancing your existing mortgage can provide you with important financial benefits to help you better manage your budget.

How Refinancing Lowers Your Mortgage Payment

Refinancing your existing mortgage essentially will replace your existing loan with a new loan, but you may not understand how this will result in a lower mortgage payment. When you initially applied for your current mortgage, your payment was fixed based on the interest rates at the time as well as the original loan balance. Since that time, you likely have reduced your loan balance considerably, and interest rates may be improved as well. In fact, some homeowners are able to refinance to a lower rate as well as pull equity out of their home in the process.

How Home Equity Could Further Reduce Monthly Expenses

While your main goal for refinancing a home mortgage may be to reduce the large monthly mortgage payment that you are responsible for, the fact is that you may be able to use your home equity to further reduce your monthly expenses. For example, you can use extra funds provided to you through a refinance to pay off an outstanding student loan, a car payment or a credit card balance. Some homeowners may even be able to pay off most or all of their debts by tapping into their home equity.

It is common for homeowners who have a high and unmanageable mortgage payment to feel overwhelmed and even trapped by their financial situation. However, as you can see, lowering your mortgage payment and even reducing some of your other expenses may be easier to do than you might think. If you are interested in learning more about how refinancing your mortgage may help you to improve your financial situation, you can speak with an experienced mortgage professional today.

/by

Recent College Grad? Learn How to Successfully Juggle Student Loans and a New Mortgage

Recent College Grad? Learn How to Successfully Juggle Student Loans and a New MortgageIf you recently graduated from college and are about to become a homeowner, you’re in a somewhat unique position. You’re about to embark on a great journey, but at the same time, you’re also taking on an awful lot of debt. That said, it is possible to successfully manage a high debt load if you’re careful.

So how can you make sure you can pay your mortgage, your student loans, and your mortgage expenses – all without losing your mind? Here’s what you need to know.

Make Sure You Have An Emergency Fund

Managing a high debt load isn’t necessarily a challenge if you have a consistent income stream. But if interest rates rise on your floating mortgage, if your portfolio doesn’t do as well as expected, or if you lose your job, you may find yourself unable to pay your expenses without dipping into your savings. That’s why you’ll want to establish an emergency fund – a spare supply of cash you can live on for 6 months or longer, if necessary.

Extra Cash At The End Of The Month? Attack High-Interest Debt

Mortgage rates are still at a historical low right now, which makes now a great time to become a homeowner – but if you’re going to carry a mortgage and student loans, you’ll need to be smart about how you repay your debts. High interest rates can quickly add up and eventually crush you, which is why your debt with the highest interest rate should be your primary priority. This is most likely your student loan – so if you have some extra money left over at the end of every month, put it toward your student loan first.

Never Roll Student Loans Into A Mortgage

Some young people seem to think that getting a mortgage is the answer to student debt. By rolling your student loans into a mortgage, you can worry about just one monthly payment instead of two. The problem with this thinking, though, is that your student loan is probably the size of the principal on a mortgage – and you’ll have to stretch your loan term out farther in order to afford the monthly payments.

This means that you’ll pay more money in interest over the long term. Your mortgage loan is also a loan with more severe consequences for missing a payment. If you miss a mortgage payment, you can get evicted from your home – but if you miss a student loan payment, they’ll just take your tax return.

Paying off a student loan and a mortgage at the same time is a daunting task, but it is possible. Talk to a mortgage professional near you for more repayment strategies that work.

/by

The Pros and Cons of Paying Your Mortgage off Biweekly Versus Monthly

The Pros and Cons of Paying Your Mortgage off Biweekly Versus MonthlyIf you have a mortgage, you’re probably looking for the best option to pay it off. Monthly mortgage payments are an easy-to-manage way to pay for your house – in fact, they’re the most common form of mortgage payment  but now, many homeowners are discovering that biweekly payments offer them better results.

So is a biweekly payment the better option for you? Which payment strategy best fits your individual circumstances? Here’s what you need to know.

Biweekly Payments: Pay Off Your Mortgage Faster and Save on Interest

Biweekly payments are becoming increasingly popular for a variety of reasons. With a biweekly payment, you’ll pay less money in total interest payments over the course of the whole mortgage, and you’ll pay your mortgage off faster. Biweekly payments also make it easier to budget for your mortgage because they coincide with your paycheck, and the biweekly payment system forces you to make extra payments toward your principal.

That said, biweekly payments also have some disadvantages. If you’ve bought a home at the very top tier of what you can afford, you might not have the budget flexibility for extra payments. Your lender may also force you to pay a $300 setup fee or a processing fee for each payment.

Monthly Payments: Easier to Afford for Large Homes

Paying your mortgage off on a monthly basis has long been the standard, for a variety of reasons – for instance, most homeowners are typically more comfortable with monthly payments as they were the norm during the owner’s years as a renter. It may also be easier to manage monthly payments if you work as an independent contractor and don’t always get paid every two weeks.

Monthly mortgage payments are more affordable for owners of larger homes, which typically come with larger mortgages. A monthly payment schedule also means you make one less payment per year, and for those on a strict budget, this can help to make the daily necessities of life more affordable.

Monthly mortgage payments were once the expected norm, but now, a lot of homeowners are choosing to make biweekly payments in order to pay off their mortgages faster and better budget their money. Monthly payments still remain popular, though, for a variety of reasons.

So which one is better for you? A qualified mortgage advisor can help you determine your best course of action. Call your local mortgage professional to learn more about your mortgage payment options.

/0 Comments/by