Everyone has that one friend or relative who bought an awesome piece of real estate only to find out later that it was not all that awesome, especially financially. Although your sympathies extend for that person, there is no need to get into the same situation yourself in order to empathize with him. This is why it is recommended that you go through the following 3 financial tips carefully in order to safeguard yourself:
1. Hire An Independent Inspector For Your Property
There are many first time homebuyers in the market, who think that hiring an independent inspector for your property is a sheer loss of a good few hundred dollars. Wrong! What you are ignoring is the fact that an independent and trained inspector can conduct a thorough inspection of the whole property and give you a detailed report of its condition. This will help you in estimating the renovation and repair costs that you can be expecting and you can strike a deal with the seller in that case.
Instances of sellers hiding serious problems about the f property (for which the new owner had to shell out thousands of dollars later on) are aplenty. This is why it is highly recommended that you don’t ignore this aspect citing non-necessity.
2. Conduct A Title Search
When you buying a piece of property, you will need to ensure that the seller is the rightful and legal owner of the property and has all the necessary permissions and documents to sell the same to you. If you fail to do this, then you might end up finding out that there was a lien or a claim on that property and you will end up losing the property to that person.
The worst part being that this is not where your ordeal will end. You will lose the property but you will still be liable to pay off the complete loan amount with interest and everything. This is why real estate experts strongly recommend hiring a trained attorney and a professional real estate lawyer to ensure that these problems don’t crop up in the first place. In case you are unsure about whom to hire, you can always approach one of the reputed realtors to help you out with the title search.
3. Cost Of Borrowing And the Loan Period
The rule is very simple and remains unchanged when it comes to any form of borrowing, basics of home mortgages or even home loans. When you take out a loan, you pay a certain amount as interest to the lender. This is the cost of the loan. This cost of the loan will increase as you increase the period of the loan i.e. the time you will take to repay the principal amount along with the agreed interest amount.
This example will help you explain the scenario. Say, you take out a loan to buy a house that costs $100,000. You agree to pay off the loan @ 5.5% interest over a period of 30 years. You will end up paying a total of $204,404.4. This means that you paid an amount of $104,404.4 in interest to the lender as cost of borrowing.
Now say, you take out the same amount of loan but agree to pay @ 8% for 15 years. In this case, the total amount you will be paying is $172,017, which means the interest i.e. the cost of borrowing is $72,017. Now you save a total amount of $32,387.4 by reducing your loan period and increasing your monthly installment.
Now that you know that these 3 financial aspects of the new home must be taken care of in order to future prof yourself financially, you can go ahead and sign that contract paper!
B. Lyttle is a finance expert and a contributor for Bank of the Internet website. You can read about them here at the ‘about us’ page of their official website.