Mortgage planning can feel intimidating for a lot of people; even current home owners. In a recent survey, nearly 60% of homeowners responded that they wished they better understood the terms of their mortgage. These are people that already purchased a home and signed all the papers. They stated that they did not understand their mortgage terms as well as they wished they did. This might be a startling fact to think about.
While mortgages can be complicated, they are not impossible for the average person to understand. Having an understanding of the different types of mortgages and how they work can provide a better foundation when mortgage planning and it can allow you to better negotiate the terms of the loan or refinance.
For some, they may lack understanding because they didn’t want to ask and appear ignorant in front of their real estate agent or the buyer. For others, they may not have known who to ask that would provide a clear and understandable answer. From conventional loans to FHA mortgage loans, jumbo loans, and VA home loans, there are many different types of loans and options that you should learn about when going into the home buying process.
Over 30% of millennials state they are planning to buy a home within the next two years. As first time home buyers, they have the opportunity to go into their first home buying experience with the knowledge and understanding needed to get a good deal on their home. The average price of a home in American is $186,000.
While not every home buyer fits into the national averages and statistics, knowing what the national statistics are will help individual buyers better understand the behaviors and actions dictating the market. For example, the vast majority of buyers are younger than 36 when financing their home. 14% of buyers financed 100% of their entire mortgage, opposed to putting a down payment on the property.
As of 2017, the vast majority of buyers are getting fixed rate mortgages. This is a separation from the previous trend of variable rate mortgages, which got many home buyers in trouble as many experienced large increases in their rates and balloon payments that became unaffordable. Understanding how various loans work in the long-term helps tremendously in mortgage planning.
For many homeowners, their interest is in refinancing, which why they wished they knew more about their mortgage and how it works. There are loan professionals that can help a homeowner understand how refinancing works and what they need to do to move forward with a refinancing.
The average homeowner will refinance their home at roughly the seven-year mark. They did this to get better rates or to get money out of their home to make improvements or to consolidate debt freeing up more money on a monthly basis. Refinancing is a fairly common practice that allows homeowners to access the equity they have in their home.
There are advantages and disadvantages to refinancing just like with anything else. For example, refinancing can extend the number of years the homeowner will be paying on the home. However, it can also lower the interest rates thus reducing the amount of interest being paid over that period of time. For some, reducing their monthly bills is the primary goal, which can be attained through refinancing.
Before signing papers, it is important to talk to a professional to ask questions and to fully understand all the pros and cons of the decision, but also to fully understand the terms of the new agreement. This will help you decide if it is truly the best option for you and your family.
Buying or refinancing a home can be an excited experience, but don’t let the excitement of the benefits distract you from getting all the needed information before signing the papers. Mortgage planning is a highly useful long-term planning tool that can help you create a financially secure future.
