A proactive approach can help homeowners balance mortgage expenses
Posted on Monday, November 24, 2014 at 8:33:24 AM
Homeownership is a significant investment. While residential financing rates are affordable at the moment, there are still factors that must be considered.
According to the S&P/Experian Consumer Credit Default Notices, the mortgage default rate ticked up slightly in September. Borrowers must understand the costs associated with residential financing, including the steps needed to avoid an unfortunate default.
To help, Home Loan Investment Bank's Patrick Deady recently offered some valuable advice for current and would-be homeowners. He began by explaining some of the costs that homebuyers can expect along the way.
"Some additional costs or expenses that homebuyers must be aware of once following a purchase include maintenance and fuel, among other items," he explained. "A homebuyer should create a list and budget any and all items that will be required to maintain their new property. For example, if the homeowner lives up north, they may need to factor in the cost of snow removal."
A proactive approach will help homeowners take charge of their expenses.
"By maintaining the property, he or she will minimize surprise expenses, which if large enough, could lead to a default," Deady added. "In addition, homeowners should fund a rainy day account which can help if there is income loss for any reason."
While preparation is key, there are other steps homeowners can take to ensure sound finances. Deady suggested building equity through residential financing.
"The best way to build equity during the life of a mortgage is to maintain the property and pre-pay the mortgage, whenever possible," he said. "One strategy is to make one extra mortgage payment per year - and some homebuyers make a habit of applying any and all tax returns to their mortgage balance as well."
With these steps in mind, it will be easier for any borrower to balance their expenses and enjoy the benefits of homeownership.