Advice for Housing Debt

Simple advice on managing housing debt.

Housing debt is a long-term expense if you purchase a home through a mortgage lender. But while most buyers finance their properties for 30 years, there are ways to help reduce the principal balance sooner and save money throughout the life of the home loan. And if you experience financial troubles down the road, provisions offered by lenders can help you keep the property.

Down Payments

While most people desire to buy their own home, not everyone prepares for down payments. Down payments are an undesirable aspect of purchasing a home. This calls for careful planning and saving in order to meet this required expense. Lenders do not require a lot from buyers, and most will only ask for a 5 percent down payment. But there are clear advantages to paying higher down payments. Borrowers with a 20 percent down payment acquire instant equity in their homes. Plus, 20 percent down reduces the loan to value ratio and lenders do not charge mortgage insurance, which decreases the monthly note on the home.

Bi-weekly Payments

The majority of borrowers are accustomed to making one monthly payment to their mortgage lender. But if you can adjust your payment schedule and commit to bi-weekly mortgage payments, you can actually save money on interest and reduce your mortgage term by years. Bi-weekly payments involve two monthly payments---on the 1st and 15th. Each pays for one half of the mortgage payment. You can setup a bi-weekly schedule with your lender, or voluntarily send in twice monthly payments, if allowed by your lender.

Increasing Monthly Payments

Understandably, not everyone wants to commit to two monthly payments. However, you can achieve similar results and pay down your housing debt quicker with higher monthly payments. Add an extra $100 or $200 to your mortgage payment each month, or send in an extra mortgage payment whenever you have the additional cash. This seemingly minor move can save you money in interest and pay off the mortgage sooner.

Assistance for Payment Problems

No property owner wants to experience mortgage payment problems. But unexpected layoffs, illness or injury can prevent work, and without a steady paycheck, owners risk losing the property to foreclosure. Regardless of what happens in life, borrowers are responsible for the housing debt. Talking with mortgage lenders and communicating the issue can help resolve payment problems. Lenders may decide to modify the terms of the loan to reduce the payment, or grant a forbearance and permit borrowers to miss a few payments.

References

• Home Loan Learning Center: Qualifying for a Mortgage
• LendersMark: How to Pay off Your Mortgage Early
• Bankrate: Avoiding Foreclosure

Resources

• Bankrate: Avoiding Foreclosure