Thursday, September 18, 2014

How Much Do I Have to Save to Buy a Home?

Sponsored ByThe first thing to understand about buying a property is that you do not need to have all the cash saved up in order to make your purchase.
The good news is that there are banks out there who will lend as much as 95 percent of the purchase price of your home, at very favorable interest rates. And the banks are willing to spread out the payments over a long period of time, so that you can afford the house you want.


If you have a steady job/ income, there is a good chance that you can find a bank who will lend you most of the purchase price of your new house.

Home loans are also called "mortgages," which comes from a Latin phrase meaning "pledge unto death." While lenders don't take your promise to pay quite that seriously, they DO expect to get repaid on time. Just to make sure you remember, lenders take an ownership interest in your house until the loan is paid in full.

Home loans typically are offered in amounts of 80 to 90 % of the purchase price of the property. You are expected to pay the remaining amount in cash from your own savings. As you might imagine; the lower percentage loans are easier to qualify for.

The reason the bank is willing to lend you up to 95 percent of the value of your house is that history has shown real estate to be such an excellent investment.

Lenders expect that your home will be worth more in the future than it is today - so their investment in your home is considered very safe.

That's also why the interest rate you can obtain on a home loan is one of the best around.

Consider that America's largest and strongest corporations borrow at what is called the "prime rate," and that today you can borrow a home loan - fixed at the same rate for many years - at substantially less than the prime rate. Lenders have found that home loans tend to be excellent investments, and you benefit every month when you make your loan payment.

Finally, home loans are available to be repaid over terms of usually 15, 20 or 30 years. The shorter term loan offers a slightly lowered interest rate, so if you can afford the higher monthly payments, you'll save in interest costs by choosing the 15 year loan.

At today's interest rates, a 15 year loan costs about 27% more than a 30 year loan in terms of your monthly payment. But the amazing thing is that lenders are even willing to offer a fixed rate loan for that time period.

It's better financing than you can get on just about any other investment.

1 comment:

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