10 Tips Need To Consider As First Time Home Buyer
A mortgage contract is absolutely essential to safeguard the rights of the person investing his or her hard earned money in a particular property. Most people are not able to make a complete down payment and contact banks or other financial institutions to get the majority of the money. In such a scenario, their home is under a mortgage and non-payment can result in it being taken over by the bank.
• It is extremely rare for people to first think about the mortgage and understand its terms and then go ahead and select a property.
• A common mistake made is to compare the rate of interest of different banks on the basis of the heavily advertised prime rate.
• The problem is that banks do not usually charge interest on the basis of prime rate and the actual interest charged in prime rate plus 1% or 2%. Hence, it is extremely important to ascertain the actual interest being charged prior to finalizing a deal.
• Even a small difference in the rate of interest can increase or decrease the total amount you have to pay in the long run as normally mortgages run for up to 20 years.
• Another important thing to consider is whether to go for a variable rate or a fixed rate.
• Most people choose whichever if the lower rate at the time they apply for a mortgage and end up paying much more in the long run as banks may not allow change between the two.
• Therefore, go for a bank that allows you to review your choice at regular intervals. This will help you pay the minimum possible interest and have the flexibility to choose the way you want to pay.
However, this is easier said than done as banks are there to make a profit at your expense. The smart investor considers a variety of factors and gets information from a number of banks prior to finalizing a deal. Always remember that you need to be careful about a lot of factors as a home loan is a long term commitment.