TIPS FOR BUYERS

 

Many know that a mortgage is a great way to buy a house. But, quite often, many don't realize just how much a mortgage can drastically run up the cost of owning that home.

If I told you that I would sell you a $200,000 house for $364,813.42 you would never do it, but a 30 year mortgage can run the purchase price of a house up $164,813.42 in interest at 4.5% over a 30 year mortgage.

Just know, their are ways to reduce that number that are simple and within reach. If you're shopping for a mortgage, make sure you have the option of "PRE-PAYING PRINCIPAL" without penalties. Let me show you how this works.

Let's start with a $200,000 mortgage with the first payment beginning JANUARY 1st. Interest is loaded on the front of your mortgage, so your early payments are predominately interest.

EXAMPLE:
Payment one is $1013.37. Of that, only $263.37 is paid on the principal. The remaining $750.00 is interest. On month 2, your second payment is $1013.37 of which $264.36 is principal and $749.01 is interest.
So, in two months, you have paid $527.73 in principal and $1499.01 in interest. NOW, if you add the principal of the second month with your first payment you can skip the interest on payment two. So, on JANUARY 1ST you would pay $1277.73. That eliminates $749.01 in interest from your loan.

Now, in February, you would make payment 3. Payment 2 has been paid with the January payment - minus the interest which you won't ever pay. In February, if you paid the principal of month 4, $266.34, you can skip the interest of $747.03.
In two payments, you have reduced your overall mortgage costs by $1496.04 in interest. If you repeat that every month throughout your mortgage, you can radically reduce the overall interest costs of your mortgage. :)

Dream it - Buy it -Live it 

Major Economic News.

February 2, 2013

Major economic news this week:

Today the global stock market climbed to the highest in two years, aided by an increase in manufacturing and new employment data which indicates the global economic recovery is on track. This week Dow rose above 14,000 for the first time since October 2007. Employment data was released today and showed what was expected-- steady but slow growth for January with 157,000 added jobs, 196,000 in December and 247,000 in November. Job creation is steady and strong enough to bring the unemployment rate down over time — just not very quickly. The January unemployment report was, more than anything, affirmation of that fact.

While the unemployment rate rose 0.1 percentage point to 7.9%, there are still solid gains in construction and retail employment. The construction industry added 28,000 jobs, following a 30,000 gain in December, which is suggesting that more homes are being built and employers are increasing their construction crews. The retail sector added 33,000 jobs and actually did pull back on hiring in anticipation of the increase in the payroll tax.

The steady growth in jobs figures explain a lot. They explain why consumer spending and retail sales held up quite well during 2012, in spite of the seemingly weak jobs numbers. They help explain why consumers in general did a far better job keeping up with financial obligations—from mortgages to credit cards. They help explain why more people were willing to take a plunge on purchasing a home or buying a new car. Buyers are starting to feel more confident, home values continue to steadily rise and there is more optimism about the economic recovery. In end, the financial situation of 2013 is rather bright especially in consideration of the fiscal cliff deal. But the new tax increases for 2013 that was worked into the fiscal cliff deal could still affect retail sales and other measures of economic performance in coming months.

What does this mean to us? Very low inventory. Prices rising quickly and multiple offers. This was a very unusual real estate recession. Caused by a sudden crisis in liquidity in which financing dried up overnight in late 2007. Now that financing is back in the market we are seeing the market correct. It won't be long before we reach the highs of 2006! Who would have thought prices would recover so quickly? And interest rates are steadily rising!

Have a great weekend!
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