How to take out a mortgage and live in peace

2024 Author: Malcolm Clapton | [email protected]. Last modified: 2023-12-17 03:44

The decision to take out a mortgage loan should be approached wisely and responsibly. Yulia Ermilova, who has extensive experience in the field of mortgage, shares useful recommendations with the readers of Lifehacker. Compliance with them will allow you to make sure that the loan practically does not affect your lifestyle, and the new home brings only joy.

Today a friend called me and complained that the bank was threatening to evict me from the mortgage apartment. They demand to pay late payments, but she has not been able to find a job for six months after being laid off.

Every time I hear such complaints, I understand that most of the problems arise from the frivolous approach and even irresponsibility of the borrowers themselves. I myself - only for a mortgage, this is a great option to buy an apartment and live now, buy it for future use or invest. You can and should take a mortgage, only you need to approach a mortgage loan wisely and responsibly.

During my work at a mortgage bank, I have carried out hundreds of transactions, have seen hundreds of family financial stories and, most importantly, how these stories develop over the first few years. And now I can share with you the main rules of a safe mortgage, so that new housing is a joy and a loan is not a burden.

So there they are.

1. Maintain a lifestyle that is acceptable to you

A mortgage will not be a yoke for your family if the mortgage payment does not become a significant part of your budget. That is, you will be able to pay off the loan on a monthly basis and this will not radically change your lifestyle and will not infringe on the interests of family members. Perhaps you will go to Europe not three, but twice, change the car in five years, and not in three years, and so on - here the options need to be adjusted to the needs of the family. But you will have enough money to buy clothes, food, medicine, pay for school, and you will not have the painful choice between "sit with friends in a cafe" and "buy a metro pass tomorrow."

2. Predict your earnings

When calculating a mortgage loan for 15-20 years, think how many years you will be able to repay it. Your needs will change dramatically over the course of 20 years, and your costs are likely to rise. Children are born, health problems and the like may appear. Forecast your income for at least 7-10 years and do not take into account bonuses and non-fixed premiums. They may not exist, but there will be payments.

3. Have savings for a year of payments in advance

Yes, for at least a year. Because life is unpredictable. Decrees, layoffs, layoffs, serious illnesses and injuries. You should be confident in your tomorrow, and not shake like an aspen leaf in fear of change. Strategic financial reserve can help you sit comfortably with your child or get through difficult times. Or have some assets that you can sell quickly.

4. Evaluate your co-borrowers

If, to increase the loan amount, you attract relatives to co-borrowers and hope for their participation in the payment, then think twice. Loss of a job, change in life circumstances, or deterioration in the health of co-borrowers often lead to a change in plans for financing your mortgage.

5. Get life insurance

By law, it is obligatory to insure the apartment itself and the risks of loss of ownership, and life insurance is not required. Do not pay attention to this "not required", do not listen to those who say that this is an extra waste, and brag about how he saved a lot. Be sure to insure your lives for the full amount of the loan. Yes, insurance is not cheap and you have to pay for it every year. But it's worth it, believe me, when you and your family have a third-life mortgage. Get life insurance!

6. Take out a loan in the currency of income

The desire to save money on a reduced rate and a fall in the dollar rate will turn into a double payment if it rises. Choose the loan currency in which you have your main income.

7. Choose the right place

Choose the area thoughtfully where you buy an apartment. Especially if this is not an investment purchase and you will live in it, drive from there to work, look for a kindergarten and a school nearby. Never choose an area on the "where the funds were enough" principle. You should be comfortable there! It has been proven that if you rate the travel time to work and back home as “good” or “bearable,” you will very soon become intolerant. And you have already bought, made repairs, and often there is not enough money and moral strength for new solutions. Dissatisfaction will accumulate, and the existing mortgage loan will be to blame.

8. Calculate the area of the apartment

You take out a mortgage loan for many years, and if you are a young family, then, probably, children will soon appear. Consider accommodating all family members well in advance. Because buying a larger apartment in 2-3 years is likely to cost a lot. You will pay for the services of the bank to issue a new loan and the services of realtors. If you did not make early payments, then you will find that all this time you paid interest and owe the bank exactly the amount you started with. And if the cost of your apartment has decreased, then you will have to pay extra to the bank. As a result, often a rather big family lives in a small apartment and blames the overwhelming mortgage loan for everything.

9. Collaborate with the bank

When problems arise, don't wait for the thunder to strike. Ask the bank for a deferral or restructuring. Believe me, banks often meet halfway. It is beneficial for the bank that the borrower pays on time and preferably longer. Therefore, do not hesitate, ask, and it may very well be that you will be rewarded.

10. Have a backup plan

In case things go wrong. If a solid plan is not so reliable, you need to understand how you will act and where to live.

I repeat: life is unpredictable. But these simple rules will ensure you a calm life and a good credit history.