If you're like many people, your home may be your greatest single asset an investment that will hopefully increase in value over time. You home may also be your greatest expense, and your largest debt. Safeguarding your investment starts at the beginning, with the mortgage itself. Here are some tips:
- Shop around for the best mortgage value when buying a home. Factors to consider include:
- Interest rates, points and length of mortgage. Make sure you are comfortable with the mortgage payments from the start.
- Buy the house you need, with the payment you can afford. And if you think that a few percentage points in the interest rate don't make much of a difference, think again.
- Always check the reputation and stability of the financial institution. It is common practice among some institutions to sell mortgages to companies which offer limited, if any, service after you sign. Ask before you sign.
- Shop around for refinancing. With interest rates hovering around 7%, now may be the best time to review your mortgage and see if you can refinance at a better rate and a lower monthly payment. The rule of thumb is that if you can get a rate at least two percentage points lower than your current one, refinancing may be your best bet.
- Be aware of the do's and don'ts of home equity loans. Home equity loans have become the primary source of instant cash for many families. There are two types of home equity loans. The first is a fixed loan, the traditional second mortgage. The second is an equity line of credit. Once the loan is approved, a sum of money is ready and waiting for you when you need it. It sometimes comes complete with check writing privileges. The interest on home equity loans can be tax deductible if you itemize deductions on your tax return.
Consider home equity loans as a source of financing when:
- You would ordinarily borrow money anyway such as for home improvements or major repairs, college expenses, a new car.
- You expect to remain in your current home for several more years.
- You have a plan and the means to pay yourself back. A home equity loan should be used to help you achieve major objectives not bail you out of trouble. And remember, you are borrowing from your own future.
Don't consider a home equity line of credit if:
- You are in a financial bind. If you're already strapped for cash, taking on the burden of that extra payment could jeopardize your home.
- You are thinking about using it to fund a vacation or some other well-deserved treat.
- Protect yourself and your family with adequate life and disability insurance, in addition to your homeowner's coverage. If you have a mortgage or home equity loan obligation, it is crucial that you carry adequate insurance on household income earners. As long as everyone remains alive and well, the debt will probably be paid off as planned. But what if one of you dies or becomes disabled?* That's where the insurance helps. It can provide needed cash at a critical moment to either pay off the debt or enable your family to continue making payments.
* Disability insurance products available through one or more carriers not affiliated with New York Life, dependent on carrier authorization and product availability in your state or locality.
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|Safeguard Your Mortgage: Four Tips|