With most households paying less than they were four years ago, it’s easy to overlook the value of the mortgage you might be signing up for.
But, if you’re a homeowner with less than $200,000 in equity, you may want to think twice about it.
For most people, buying a mortgage in the first place is the cheapest option.
Mortgage brokers can help you narrow down your options and determine whether or not the property is worth the money, according to the National Association of Home Mortgage Lenders.
But if you don’t have a high-paying job, or you’ve recently had a major down payment on your home, you might not be able to afford it.
A mortgage is a financial commitment that can help cover your down payment and other monthly payments, said Julie Fischman, the director of financial literacy for the National Credit Union Administration, a nonprofit consumer credit and loan organization.
In addition, a mortgage can help keep your home safe from the dangers of foreclosure and foreclosure prevention, Fischmans said.
“It’s a mortgage you take on because you need it to buy something,” Fischmen said.
The mortgage lender usually wants you to pay the same amount for the same property.
For example, if your home has $500,000 of equity, the lender may want you to get a 10-year mortgage, which pays about $10,000 per month.
That means your monthly payment would be about $300.
The lender can make this amount flexible by adjusting the amount of the loan based on your income, said Mark Loescher, chief executive officer of Mortgage-Advantage.
Mortgage-advantage, which is owned by CitiGroup, offers an array of mortgage calculators, including one that calculates the mortgage payment based on the income you’re making.
“The average borrower pays about 35 percent of their income on their mortgage,” Loeschner said.
“If you’re earning $50,000, you’d pay about 30 percent of your income.
But you’d be paying 25 percent if you were earning $60,000.”
If you are living paycheck to paycheck, your mortgage payment can be significantly less, Loeschers said.
If you have more than $5,000 left in your savings account, your monthly mortgage payment could be significantly lower.
Loescher said the best option is to keep the amount you owe on your mortgage fixed.
If that doesn’t work, you could apply for a variable rate mortgage, in which the lender would adjust the amount depending on your monthly income and the size of your loan.
“If you pay a mortgage, they want you,” Loechner explained.
“The variable rate will increase with the amount that you owe, so it’s a better option if you have the money.”
Even if you are a homeowner that’s struggling financially, you can still save money by refinancing your mortgage.
Loesches said refinancing a mortgage will help reduce the cost of your home while also lowering your monthly payments.
For instance, you’ll save $250 per month if you take out a home equity loan, according the American Association of REALTORS.
The loan can be cheaper than buying a home outright, but refinancing reduces the monthly payments to the point where you’re paying less.
For example, you would pay $300 for a 20-year fixed rate mortgage.
The refinancing option will reduce the monthly payment to $200 and reduce the amount the lender will charge.
If your monthly rate is lower, you will pay less per month on the loan.
If you don, however, you should be cautious about the amount your lender may ask you to take out.
If the lender wants to go up in price, the average loan goes up by 20 percent, Luescher said.
Loses money and gets you into debt, so you may have to take the loan out again.
The Federal Reserve said in a report that home prices in the U.S. rose by 2.7 percent in April from a year earlier, but there are many factors that can contribute to a price hike.
The increase can be due to a drop in demand, higher prices and the possibility of higher inventory.