When it comes to buying a new home, the current market trends suggest this might be the very best time to do so, as interest rates are likely to increase as are the overall costs of houses. However, there are still current financial risks associated in the housing market, so you need to be careful when shopping around because you don’t want to end up with extensive financial debt because you decided to purchase a house due to the improved interest rates and housing prices. These are different reasons as to why you must be careful before going out and buying a house. Possessing a finance degree and extensive background can help you increase your knowledge base to avoid almost any pitfall when considering the housing market. However, no matter how educated you are, a high measure of care is needed to avoid costing yourself far more than what the house is worth..
Variable Interest Rate
One aspect of looking at homes to watch out for is variable interest rates. When it comes to buying a home you have two different kinds of loans for your mortgage. The first is a fixed interest rate and the second is a variable interest rate. The fixed interest rate requires you to pay the same amount, each and every month, until the house is paid off. This allows you to come up with a budget and determine how much money you have to spend and how much money you need to save every month in order to cut down on your potential debt. A variable interest rate might have a better interest rate when you first take out the mortgage, but the interest rate alters over time, so it is possible for the interest rate to be far higher in a few months over what you originally took out. There might not even be a limit regarding the interest rate, and this has the potential of increasing the actual price you pay on the home rather significantly.
The actual value of homes, while holding steady, is not seen to increase drastically in the next few years. This means, if you want to buy a house as an investment, you are not going to see any sort of gain any time soon. Due to this, if you want to buy a house, then sell it off when you move, you could possibly be in for a rather large shock and a big surprise, as the house likely is not going to drastically improve in value, no matter what you do and what sort of investments you put into the house. So, if you are looking at buying a new home make sure you are doing so in order to have a place to live for an extended period of time and not just as a small investment opportunity, because you probably aren’t going to see any kind of benefits.
Avoid taking out multiple loans for a house. You might see a house that you like and know that you’ll never have a better chance to purchase it. However, when you apply for the first mortgage you might only receive approval for a set amount that is much smaller than what you’d originally hope for. No matter how desirable the new house is, don’t try to apply for another mortgage and buy it with two mortgages. This is just going to set you up for failure and you shouldn’t have to deal with this, because you are probably going to end up losing money and even the house in the long run. Only stick with what you know you can afford. It might not be a giant house, but it will be yours and you’ll be able to afford it without any problems.
Subscribe to get the free Master Your Money course!
Join the free email course and finally learn how to manage your money better, pay off debt, save more money, and reach financial freedom. Get our newsletter and get access to the freebie: