As you look to buy your new home, you may be thinking about how to make the most house fit into your budget. It may seem like the best way to do that is to take a smaller payment over a much longer note. You think you can afford a lot more house but in truth this is a terrible idea. You end up paying for way more house than you get and you stay upside down for a very long time.
“Many people have a terrible habit when deciding on home or car purchases of only considering the affordability of monthly payments, rather than the entire cost for the life of a loan.”
That low payment stretched over 20 to 30 years will cost you so much more in the long run. What ends up happening to many people is that the end up very upside down in a home that does not meet their needs as their family grows. The house becomes too small but the mortgage is such that there is no way to get out from under it without taking a huge loss. That’s not something a lot of people are willing or able to do.
The added interest payments even at a low rate may also may nearly double your final purchase price. Think about it that way and then decide if the house is really worth what the final price will be if you stretch those payments out over a full 30 years. Most find that pushing to make a higher payment for 15 years is a much better deal over all. It allows you to really build equity in the home and allows for the potential for remodeling or moving over time if it doesn’t always fit your needs. That means you can find the perfect house for your family and your budget today without the fear of being locked in forever.