A booming housing market has led to a drought in property supply, leaving buyers with high prices and less leverage. Nonetheless, buying a home continues to be an oft-advised, tried-and-true way to invest. The market has enjoyed continuous appreciation since 1975, albeit with many severe bumps and dips. The snag is that mortgage lenders are still feeling jumpy in the wake of the recession, which means buyers need to approach their loan applications with a few tricks up their sleeves.
The Refinancing Tactic
One of the most effective ways to achieve better terms is by refinancing your existing home. A lender who has learned to trust and value you as a client for years is more open to offering an attractive rate modification that comes at a comparatively low onetime fee of between $500 and $1500. In fear of losing a profitable client, banks are often willing to be more flexible in order to offer you attractive terms without exorbitant closing fees.
The Deposit Device
Putting down a larger upfront payment is a strategy as old as the hills but achieving that bulky down payment is not as easy as it may sound. If you have enough liquidity, adding to the minimum deposit will not only bring you reduced interest rates but also shorten the repayment term. If you are cash poor, it pays to spend some time saving before you apply for a loan. The foundation of initiating your savings strategy is to switch from a current account to a savings account that offers better rates. Minimum deposit accounts can be equally lucrative. Investing in low risk stocks will bring in a slightly higher return than bank accounts.
Before the mortgage market began to punt interest-only loans that let you keep your early repayments down, all borrowers were offered amortized mortgages. Often, it is the traditional techniques that make the most financial sense. This is certainly true for amortized loans, which let you pay the interest and principal amount simultaneously. This tactic ensures that you are not hit by heavy payments at a later date while keeping you in control of your housing debt from the moment your mortgage is initiated.
Credit Report Cleaning
Your credit rating has the power to raise or lower your fees and interest rates substantially. Some methods of fixing your score are more easily achieved than others.
According to Forbes some 21 percent of people have at least one mistake on their credit reports and 5 percent have serious errors that would lead to loftier interest rates. Simply checking every aspect of your report is a core part of personal financial management. Details that affect credit-worthiness include employment history, rental history and voters roll data. Once you’ve plowed through your annual report, errors should be sent to the credit bureaus and the attorney general’s office in your state along with evidence proving that the information is erroneous.
Paying attention to tax laws will bring your deductibles up, leaving you with more money in the bank after you have made your monthly repayments. Mortgage interest is tax deductible and is often high enough to shift you into a better tax bracket.
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