Some people try to apply for as small of a mortgage payment as they can reasonably afford to, and there is some prudence associated with this line of thinking. After all, recent economic events have shown that those who get over-extended may wind up in a dire financial situation.
However, there are also benefits associated with a higher mortgage and buying a slightly larger home if you can comfortably afford to do so.
For example, the rate of growth on equity will typically be more significant, and there are tax deductions and tax advantages that may be greater. If you are preparing to take on a larger mortgage payment that is reasonably manageable for you, you may do so with greater confidence when you follow a few tips.
Reduce Your Debts Beforehand
There’s no denying that home prices in and around Long Beach, like most of Southern California, have realized a sizeable recovery from the chaos in 2008. With that comes lower affordability, higher downpayments and larger mortgage payments. There are a number of common sense areas buyers should be aware of in order prepare for a larger mortgage.
First, to make sure your larger mortgage payment is still affordable (and within your budget) look to reduce debt. When you think about the difference between carrying $1200/month credit card payment or paying a higher monthly mortgage payment, it should be quite clear you will see the benefits of the mortgage payment. The credit card payments normally carry much larger interest percentages that present no real value.
Unlike credit cards, your mortgage payment is building equity (ownership to you) through principal reduction on an asset. In addition, interest on a mortgage has definite tax benefits. My recommendation to all my buyers is to pay off or greatly reduce your credit card debt before you take the final steps of buying a home. You may even want to consider closing one or more of your existing credit card accounts. Afterall, the last thing you want to do is accumulate additional debt while having to pay a higher mortgage.
Make Sure Your Personal Savings is Growing Month-by-Month with Your Mortgage
One of the most effective budgeting moves that come with a higher mortgage is the ability to grow your savings account…even with a higher mortgage. My If you are unable to save with a higher mortgage payment, you may be taking on a little too much debt for what you can afford.
I always suggest to my clients that they 3-6 months worth of monthly expenses in liquid funds available for easy access should unforeseen financial situations come up. Having extra cash available to support you and your family should something happen will make a huge difference .
Today, a higher mortgage payment is a reality to many first time and move up buyers. On the positive side, higher tax deductions and building equity happen at a faster rate. The goal is to be in control of your mortgage instead of your mortgage controlling you!
Call me with any questions you may have regarding home buying tips around Long Beach or the surround area.