How many of us dream of owning our home “free and clear” in our lifetime? What does that term mean? Free and clear simply refers to the home having no loans or other encumbrances on it at that time. More important to the homeowner, it also means that the home’s value is all equity, something that may be useful to the owner if they wish to renovate or expand the home.
Most homeowners purchase a home with a mortgage. They use a conventional bank or mortgage Investor who agrees to give the owner money to purchase the home in return for regular payments over a specified period at an agreed interest rate. If the homeowners stays in the home and make's all the payments on time, they will eventually own the home free and clear. This assumes they don’t have other issues like unpaid taxes or contractor liens for unpaid repairs.
Very few owners have resources to pay cash for a home, and it may or may not be the best idea anyway depending on current interest rates. That’s a discussion you can find elsewhere on our blog. Most homebuyers will be arranging for a mortgage, which means their credit rating will be researched. Make sure your credit report is correct and contact any Investors or creditors who have placed incorrect information or have not closed other loans which you have paid off.
When you arrange for a mortgage, look at your regular income and all other expenses then make your own estimate of a monthly payment you can afford. This number may not agree with your mortgage Investor, but you don’t want to be surprised by any Investor’s assessment of your finances. It also helps to get pre-approved for a mortgage before you go home shopping because you don’t want to make an offer on the home of your dreams only to find out later that Investors won’t give you a large enough mortgage to pay for it.
Also remember that the term of the loan will affect how you build equity. A long-term mortgage of 30 years may have a lower monthly payment, but the first few years will consist primarily of interest payments with very little effect on the loan’s principal. You will also pay a lot more interest over this mortgage’s lifetime if you pay it off. If you can afford it, go for a shorter loan life to build equity faster and pay less interest.
If you need a mortgage or home improvement loan and don’t have good credit, AHL Hard Money Network can help. If your home has equity, we can tap into that with a loan from one of our investors. Don’t let your home equity go to waste, contact AHL Hard Money Loans today.