Planning Your Mortgage

: Chris Lee Law Firm

  Filed under: Mortgage

mortgage planningThere are numerous reasons that people end up in mortgage debt. Job loss, medical illness, divorce or simply failing to plan a mortgage correctly can all lead to problems with maintaining a mortgage payment. Avoiding foreclosure isn’t as difficult as you may think and could be prevented by a little planning.

Preparation and Planning

When buying a house it is important to understand what all goes into your mortgage payment. Many people make the mistake of calculating what they can afford to pay and assume this cost covers everything in a mortgage. Mortgages include the monthly payment for the loan amount, interest fees, mortgage insurance costs and property taxes. Calculating what you can afford based solely on the loan amount is misleading and can lead to unexpectedly high costs. Using a mortgage calculator tool can help you ensure that your payment is one that you can truly afford before you put in an offer on a home.

Once you have bought a home there is still much to be done to protect yourself against foreclosure. The average homeowner enters a mortgage contract with a limited idea of what their out of pocket costs will be. Besides a down payment and closing fees, the home will likely require maintenance over time. ¬†An average home can cost anywhere between 5 and 10% of the home’s value to maintain each month. This means that owning a $200,000 home could cost you around $200 a month in maintenance costs.

Perhaps one of the most overlooked aspects of home ownership is an emergency fund. Although most people do have a savings account, few people have any money set aside specifically for their mortgage in the event of an emergency. Having enough money set aside to cover at least three or more months of a mortgage payment can help you stay out of mortgage debt in the event of an unexpected financial hardship. Further, if your hardship was to last beyond the three months your emergency mortgage fund would give you enough time to negotiate a solution with your lender before it is too late.

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