Being house poor can suck the joy out of owning your dream home so it’s essential you learn how to calculate a mortgage payment before purchasing. If you take on a mortgage you can’t handle you won’t be able to do much else beyond live in your house.
That could mean no retirement savings, no vacations, no college fund and just plain no fun. So just because you’ve saved up a downpayment for a mortgage doesn’t mean that you have the income to make those monthly payments without foregoing a lot of other things.
Planning is never easy, but with some guidance, you can figure out what you can and can’t afford when it comes to your mortgage. Follow these tips when calculating mortgage payments and you will be able to comfortably make payments and clear your mortgage fast.
Mortgage Points Utilization
A mortgage point is essentially 1% of your mortgage. Mortgage points are used in two ways. They are used to calculate your lender’s fee, so let’s say your lender is charging you a 1 mortgage point fee on your mortgage of $500,000. That means the lender is charging you $5000 as their fee.
Mortgage points are also used to buy down your interest rate. So you can pay extra costs upfront to reduce your overall mortgage interest rate. But you’ve got to make sure those extra costs will save you something in the long run.
Make Biweekly Payments
When calculating your mortgage payments, consider the costs of making the fees biweekly. You will indeed settle your debt within no time. For instance, make sure you pay off all your other debts in time to save money, which would otherwise be used to pay for fines.
If you make biweekly payments it means by the end of the year you will have paid double what you would have otherwise. If you pay your mortgage faster, you can save money on interest.
Purchase Affordable Home
You can quickly determine whether you can afford a specific home by calculating the mortgage and comparing it with the amount of money you make in a month. Moreover, if you have a stable job, you can easily calculate the monthly payments for your mortgage after deducting other expenses.
When you find that you can quickly pay for the mortgage with no hassle, then that’s the one fit for you. Also, examine your monthly budget and determine the amount to spend on housing.
Whenever you are paying for your mortgage, you can also pay extra. When you pay extra, the principle theory applies where your monthly installments can go down. Paying extra is the best way of getting rid of your debt on time, but some institutions will penalize you for paying it off early – so check.
Also, dedicate any bonus, raise, holiday, or graduation gift you receive to clearing your mortgage. Don’t ask yourself what to do with the extra money after you’ve got your emergency fund stocked away. Spend most of the money that falls into your hands on paying your mortgage to be on the safe side.
Unpaid mortgages can lead to you and your loved ones losing your home so don’/t let that happen.
Refinance Your Mortgage
Stay updated on your mortgage and understand various ways to reduce the interest rates and shorten the duration of the loan. You can make higher payments in order to pay your mortgage faster. You can also apply for the Home Affordable Refinance Program and receive guidance on how this process works.
Also, consider a tax refund, which allows you to make one extra mortgage payment in a year. When you make one extra payment for your mortgage, it has a significant effect on the monthly payment, allowing you to pay your mortgage within a shorter period of time.
Pay extra and also plan a biweekly payment schedule to clear your debt within a shorter period of time. Moreover, make sure that before you sign up for a mortgage, you calculate what you will have to pay. If you can’t comfortably make your monthly payments, you should wait to buy your home until you can.