Monday, April 14, 2014
Most home buyers buyer their property through a mortgage loan. When you apply for a home loan, your property is put up as collateral in case you fail to fulfill your financial obligations. Meanwhile, an initial deposit is required and monthly payments are made over your loan term.
It’s easy to become complacent and overly reassured about paying off mortgage loans. However, if you’re not earning a fixed income but rather generate earnings from a business, sales commissions, freelance projects and the like, income can be hard to predict and you may just find yourself in a tough financial situation. Get some tips...
Crunch the numbers before you buy
The most basic way to avoid bad debt is to examine how much you can afford before you buy a property. Be realistic in your assessment. Don’t factor in projected income, as this may not ring true later on. It’s best to do the numbers with your current income and compare it to your monthly mortgage payments and other personal and household expenses. This will give you a better view of your financial situation. Consider making a larger down payment on your home, as this will make your mortgaged amount more manageable.
Make a financial plan
As you go through the months and years of paying your monthly expenses successfully, examine your finances routinely. You may encounter a salary raise, a year-end bonus, business failure or other life events that make an impact on your financial situation. The way you handle finances and pay your mortgage loan will inevitably be affected by these happenings. Make financial plans as you go through these changes. For homeowners who are couples, it’s also important to discuss these matters with your spouse to make sure you’re on the same page.
Pay off your mortgage loan earlier
If your financial situation permits you to make larger loan payments every month, consider paying off your mortgage loan earlier. This decision will help you save money and be free from debt. Your savings will basically amount to the interest rates you won’t need to pay for once you settle your mortgage loan. On the other hand, you should also check whether your loan package has terms on prepayment penalties.