Borrowing the Right Mortgage Amount

Pay close attention to the specifics and avoid paying more than you need to for mortgage.

13:56 15 October 2013

Everyone dreams of owning a house someday.  However, when the time for taking on a mortgage comes, we find out that this endeavor could result in us making some difficult decisions.

You will be presented with various mortgage options with varying interest rates.  Analyse and understand all the options presented to you to be able to choose a scheme that will work for you for until the mortgage is fully paid, which could be a number of years.

Affordability

This should be of your foremost consideration.  To avoid being disheartened or being pushed in to choosing a house that is beyond your means; look only at houses within your budget range, something which you can realistically afford on a monthly basis.  From there you can work out how much total mortgage is practicable for you.

Consider as well the maintenance cost that should be computed when deciding on the amount that you will borrow such as cost of maintaining the lawn, electricity to keep the environment comfortable (warm or cold), plumbing and electrical repairs, among others.  Do not forget to add in the real estate taxes and mortgage insurance which is not a small amount of money.

Interest Rate

The lending institution will review your credit history and your credit scores as you apply for mortgage.  Credit scores affect interest rates.  Individuals with a high credit score are generally given a lower interest rating since good paying habits are considered “less risk”.

To avoid disappointments, make sure that your credit history is okay and will be rated positively before applying for a mortgage.  Otherwise, you may have to improve it first or correct inaccurate information that could ruin your chances of getting approved or getting a low interest rate.

Refinancing Options

Mortgage rates may fluctuate over the years.  If you believe that your amortization has become a bit too much, you should look at having the balance of your mortgage refinanced.  You can also cut down your payment time or lessen the monthly payments by paying a large amount to reduce the principal amount.  Improved credit scores can also be considered for refinancing.  Know how much fees will be charged for refinancing from your bank prior to changing your scheme.