| Taking
a Larger Mortgage Than You Need |
Have you qualified for more than you need when it comes to a mortgage? Is your New York City apartment going to need renovation or repair or do you have other financial debts that aren't getting any smaller?
If any of the above situations apply to you then you may be able to benefit by taking out a larger mortgage than you actually need.
If you have a fair amount of money for a down payment then you may want to take more out on the mortgage and put less money down. This means you will have more cash on hand for use, as you need it. However, why take more out on your mortgage and increase what you owe? Often a mortgage loan is cheaper than all other types of a loan. A mortgage interest rate is 5 to 10% less than other loans depending on who you get your loan through and how high your credit rating is. As of 2009, many mortgages are 5% or less if you are buying through a reputable bank and have good credit. Most consumer loans come with an interest rate of 10% or higher, the interest rate on credit cards is often between 15 to 18% and can be as high as 29% if you don't have a good payment history. This means you can save a lot of money and get farther ahead if you replace your credit card debt with a mortgage payment.
So what if you want to fix up your new home? If you bought a property that needs repairs then there are two advantages to taking out more mortgage than you need. First, you will be able to add value to your home through renovations. Second, you will be able to get the money needed for repairs at a lower cost. You will also benefit having saved money on the repairs, enabling you to get more value and enjoyment from your new home.
Be aware that you aren't reducing your down payment in relation to the home purchase price when increasing the amount of your mortgage. Sometimes lenders will require that your mortgage and down payment equal the market value of a home and won't give you money in excess of the home value; in this case you could apply for a home equity loan.
If you are taking out more mortgage money, ensure that that decision is your own. Don't let your lender or real estate agent push you into making this decision. This can be a hallmark practice of predatory lending and if you aren't careful, you can end up with a higher mortgage payment than you can handle. Make sure you consider your specific financial situation before choosing to increase the amount of your mortgage. This option is only right for you if it places you in a financial situation that is manageable and benefits you in the end.
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