YOU can reduce interest cost by shortening your repayment period and reduce monthly instalments by extending your repayment period.
Statistics show that many people run into financial problems after acquiring a house of their dream and become house poor. You are house poor if you have no extra money left to pay for emergencies, go on holiday, cover your expenses and save for the future, because your house payment is too large. What was supposed to be a dream house has become a jail or prison, and many couples remain in these prison houses until retirement or death. For others acquisition of a dream house brings with it depression, divorce, suicide, unexplained illness and financial crisis. You can avoid being part of the statistics and enjoy your dream house by preparing a financial plan and doing a proper home work before buying a house.AFFORDABILITY & HIDDEN COSTS Home ownership is the key to wealth accumulation and offers special advantages that make life more enjoyable, and a chance to enjoy your family’s companionship in the privacy of your own home. Most people start on the road to financial independence through home ownership, but buying a home is the most expensive purchase you’ll ever make. One of the first steps to take when you’ve decided to be a homeowner is to determine how much house you can afford. There are two parts to this. The first is to follow a budget for at least three to six months so you know your spending habits and how much money you have to survive on. The second is to estimate how much money the bank is likely to lend you so you don’t waste time and emotional energy looking at houses or suburbs you can’t afford. To estimate how much you can expect to borrow, use the two basic guidelines that banks follow. The first guideline is that principal, interest, taxes, and insurance shouldn’t exceed 35 percent of your gross income. Mortgage payments aren’t the only expense to consider when evaluating whether you can afford to buy a house and how much you can afford to spend. There are also property taxes, which can be substantial, homeowner’s insurance, repairs and maintenance, electricity, sewer and water bills, major appliances, maintenance costs, and more. If you plan ahead and know how much house you can really afford, and estimate the hidden expenses associated with owning a house, you can avoid being house poor, unable to afford anything but the house payment. Being house poor can propel you more deeply into debt because you use credit for purchases you would pay cash for if you were not so strapped by your monthly house instalments.
