Whether You Rent Or Buy, You Are Paying A Mortgage
The American dream was all about owning: owning land, owning a house, owning a car, etc. But not many could afford to buy a house in one lump sum. This is where the banks came in, with the idea of loans specifically designed for those who wanted to buy a house, simply said; mortgages.
A mortgage implies an institution, public or private, who lends you a lot of money, usually 80% of the house’s price, which you will have to pay back with interest over a certain period of time. For many years, the only mortgage one could get was the 30-year fixed-interest loan, but, in the 1980s, the adjustable rate mortgages or ARMs entered the market. The ARM offered low initial interest rates and adjustable annual rates for the rest of the loan period.
Buy a house and pay the mortgage
The days when you could only apply for one type of mortgage in order to be able to buy your dream home are over. Now, you can choose from hundreds of lenders that offer a variety of mortgage loans for you to choose from. Whether you are looking to buy a new home or to remortgage (typically referred to as refinance), Maureen Martin can help you every step of the way.
The benefits of a mortgage loan lies in the fact that it is spreads over many years (25-30), so you have to pay back an affordable and manageable amount each month. If you choose to go for the shortest term you can afford, you will save thousands of dollars in interest.
Also, the interest rates for mortgages are much lower than those for other forms or borrowing, because the lender has the certitude that, if something goes wrong and you can no longer pay your debt, they still have something valuable (tangible for that matter), your house, to sell and recover their money.
Renting versus paying the mortgage
You might find yourself in the situation of not being able to make mortgage payments on time. In this case, it may be worth considering to rent out the house for a certain period of time. But this solution is efficient only if the rent is higher than the monthly mortgage payment, so that you can afford to pay your mortgage and still find a nice place to stay.
While your home is rented, you can start a savings program, so as to catch up with your mortgage payments and reduce debt. Renting your house is a smart idea, as it allows you to keep your home. The tenants will give you money to pay your mortgage, and you can choose not to renew the lease once it’s up if you want to move back in.
And if you were thinking that renting a place is preferable to buying one and putting up with mortgage payments, think again. When paying your rent, you could actually be paying your landlord’s mortgage, so why not pay your own. After a few years, you could turn from a tenant into a landlord, without even realizing it.