After selling my condo at a hefty profit last month, I have to say that it’s quite a liberating feeling to not have a mortgage hanging over my head right now. While it wasn’t ever a problem for me to pay the monthly payments (plus extra!), there was always a part of me that hated the idea of toting around a six-figure debt load thanks to the mortgage. That being said, a mortgage is a reality that I’ll be revisiting once I decide where/when to purchase my next property.
A few years ago when I decided to buy my condo and began to think about all of the different types of home loans available out there, I was surprised to learn about the various nuances that each kind of loan entails. It’s easy to think of the standard first-time buyer and refinancing loans, but what about those for investment properties, renovations, and bridging gaps between your current home and your next home’s purchase? The more I read and learned, the more I realized that there are virtually hundreds of options to finance homeownership needs.
First-Time Buyer Loans
Purchasing your first home can be a daunting task filled with many decisions and plenty of confusion. But it’s also an exciting time and one that can be quite enjoyable if you do your research before deciding on what type of mortgage you’ll apply for.
Before you submit a single home loan application, make sure you’ve thoroughly researched your options, have calculated all of the costs of your new home (including insurance and taxes!), and have money in the bank for a down payment.
Next Home Loans
If you’re looking to upgrade (or even downsize), you have the benefit of experience on your side. Use what you learned during your first home-buying process to ensure you’re making even better decisions the second or third time you buy a home.
Shop around for the best rates, find the terms that work for your unique situation, and use whatever equity you might have in your current home to your advantage. If you’ll have overlapping timelines for when your next house and old house close and you’re short on cash, you could always consider a bridge loan to cover any expenses in the interim.
I refinanced my mortgage last year, and I was fortunate enough to lock in a great rate, reduce my monthly payment, and recoup every penny of the closing costs in less than a year. Refinancing makes sense if you have built some equity, have excellent credit scores, and can live in your home long enough for the reduced monthly payments to payback any closing costs associated with the new loan.
It’s a great way to reduce your monthly payments, shorten the life of your loan, save boatloads on interest in the long run, and even consolidate debt.
Before I decided to sell my home, I was considering the purchase of an investment property. While I decided to shelve that idea for now, I do see myself owning multiple properties as an income-generating option in the future. Once I have a new home, I’ll need to take out a special loan for any investment properties I purchase. While the process is fairly straightforward like that of a primary residence loan, there are requirements that are more strict such as a larger down payment (usually 25% or more) to take into consideration.
Regardless of which type of loan you eventually take out, never sign on the dotted line until you’re certain that you understand 100% of the terms and conditions of the loan. Look for hidden fees and any penalties that could be imposed, investigate traditional and non-traditional financing options, and choose a lender that you’re comfortable with!