You are nothing unless you own your home, so the American dream goes. This is why we are made to believe that renting is a waste of money and mortgage payment is a good investment. However, renting can prove to be a smart choice as home buying saves money is a myth. Below are few of the home buying myths that we lead to believe.
A Home is a Great Investment
If you want to invest, then consider stocks. Paying for your mortgage may give you some benefits, but the question is, are you capable of paying your mortgage on time? The risk is much greater since mortgage payments come with responsibilities too. Think of this: If you cannot pay your mortgage, you may risk foreclosing your home. Even if you default your mortgage, it will still not be enough for you to cover even one month of your mortgage. Having a foreclosed home on your history doesn’t do your reputation as a borrower any good. Compare it to renting, if you are unable to pay rent, you will just be evicted from the house. You might possibly pay your landlord for defaulting while you are looking for a new place to rent. If worse comes to worst, the case might be in court, with your credit rating getting a black mark.
Property Value Makes a Good Profit
Many see homeownership with the hopes of property values to increase. The homeowners then sell the house for a profit. While it is true that you can get a profit out of your house, you might have to wait for more years for the property values to increase. Think about this, the first 5 years of mortgage payment go mostly to your interest. It would take a little longer for you to pay the principal of the loan. Only after that you can sell your home at the same price that you bought it. If you intend to live in your house within 5 years, you will end up losing your money instead of profiting from your house.
Bigger Down Payment is Wise
Home buyers are usually encouraged to pay bigger down payment following the idea of borrowing less and saving more from the loan interest. It is also believed to lower your mortgage payments. Besides that, you will not need to buy for mortgage insurance. This is needed if your down payment is less than 20% down payment. If the property values decrease and you wanted to sell your house, you will have a less chance of contributing extra cash to pay your mortgage. However, you don’t actually need to pay 20% down payment since the Federal Housing Administration loans come with down payments as low as 3.5%. Paying 3.5% may let you get a lower interest rate compared to paying 20% as down payment. Lenders feel more secure if the loans are secured since they are covered once you default. Paying for a lower down payment means that your money isn’t all tied up in your house. You will be left with a little cash for home improvements and repairs or even hire renovation builders Melbourne. A lower down payment also allows you to distribute your money among a myriad of investments such as bonds, stocks and mutual funds. This way, you will be able to recoup your real estate loss once it doesn’t go on your favor.
Owning A Home Equates Peace and Security
Owning a home may be the American dream, but it comes with tons of responsibilities. Although you are no longer subject to the whims and caprices of your landlord, get to save the money from moving out and have the freedom to personalize your house, owning a house is not as secured and peaceful as you think considering the mortgage that caused 10.7 million households so much anxiety and apprehension. You also