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A financially stable homeowner may face no difficulty in managing the monthly mortgage reimbursements. However, it is crucial to ensure the regular payment of mortgage dues in the event of a possible monetary crisis. An unexpected illness or redundancy may bring about a significant fall in your income to make the scheduled payments unaffordable. You may go by these pointers to manage your mortgage expenses to prevent a financial disaster.
Draw up a comprehensive budget including all items of daily expenditure for your family and occasional expenses on parties and other events. Take account of your monthly utility bills. Do not forget annual expenses like insurance premiums and car and property taxes. Enter all your tax payments and ensure that you are availing of the discounts on your council tax.
While planning your budget, make a list of items on which you spend your money. Ascertain if you can cut the costs of any of these items occasionally to save money. If your lender allows overpayment facilities on your mortgage, you may make an additional payment at times to reduce the principal and the total interest payment over the mortgage term.
A home equity loan or a second mortgage may present a tempting way to avail of extra funds. However, it is vital to establish that you can meet the repayments of the second mortgage. Scrutinize your budget to see if you can accommodate the extra repayments. Since a home equity loan uses your home as collateral, defaulting on the mortgage payments could cause you to forfeit your home. A refinance could be a better option, if the prevailing rates are low enough. Determine the prepayment penalties imposed by a lender to see if the benefits of refinance outweigh the costs.
A prudent borrower keeps an eye on the mortgage market even after taking out a loan for buying a home. It is unwise to be satisfied with the terms of your mortgage. Since the lending market is in a constant state of flux, a better deal than your current package is always probable.
While looking for a more advantageous deal, it is necessary to consider the costs of changing the package, prepayment penalties or the new closing costs apart from the interest rates. Seek professional advice from your financial consultant before opting for a change.