Buying a home should be something you look back on as a smart financial decision and one that brought you happiness. After all, homeowners tend to have higher net worths than renters — and there’s something special about owning your own place and being able to personalize it to meet your family’s needs.
Unfortunately, not everyone ends up happy they became a homeowner. If you make bad financial choices during the purchasing process, you could be left with tons of regrets. You don’t want that to happen, so watch out for these three signs you’re making a decision you won’t be happy with.
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1. You don’t understand your mortgage
When you buy a home, chances are good you’re going to need a mortgage to do it. That means you’ll be making a commitment to pay a lender a monthly payment for decades to come — and you’ll be paying tens of thousands of dollars in interest over time.
Taking out a mortgage isn’t a bad thing, as it’s a very affordable type of loan that helps you buy an asset that should go up in value. But it can be a disaster if you take out a mortgage you can’t comfortably make payments on over the life of the loan.
If you’re getting a loan and you don’t understand exactly how it works, there’s a good chance you’re setting yourself up for this undesirable outcome. That’s because a standard fixed-rate mortgage with predictable monthly payments is easy to understand, while high-risk loans such as adjustable-rate mortgages or balloon mortgages are designed to be more complicated to obscure the fact your monthly payments could end up being unaffordable.
Before you agree to take any loan to buy a home, make sure you know the upfront costs, the monthly payment you’ll make, whether that payment could change, how high it could go, and the total interest you’ll pay over time. If you don’t know the answer to all these questions, don’t borrow until you find out.
2. You’re stretching your money to buy
If you’re worried that your monthly payment may be hard to make, chances are you’re going to regret your home purchase. It may feel like you’ll be OK making sacrifices on other things, like traveling less or buying a cheaper car, but it could be hard to sustain these lifestyle changes the entire time you’re repaying your mortgage.
Taking out a home loan that’s borderline unaffordable can also cause you other problems. You may get trapped in your job because you can’t afford a career switch due to your high mortgage payments. And you face a bigger risk of foreclosure if something goes wrong and your hours are cut.
Unless you’re confident you can easily make your monthly payment for the entire 30 years you’ll have the home loan, chances are good you’ll be sorry you ended up borrowing.
3. You didn’t budget for maintenance and upkeep
The costs of homeownership don’t end with your mortgage loan. You’ll also need to maintain your home. That includes taking care of ongoing tasks such as mowing the lawn and getting the snow plowed. But it also means dealing with major repairs over time, such as putting on a new roof or replacing the HVAC system.
If you’ve only considered the monthly mortgage payment and property taxes you’ll owe and haven’t accounted for these other costs, chances are you’ll end up devoting much more of your money to your house than planned — if you can even comfortably afford to cover these costs at all. When you have to sacrifice other goals or spend less on things you love just to struggle to cover the bills, you’ll probably be unhappy you didn’t plan ahead.
The good news is these regrets are easy to avoid. Just make sure you buy a home with a mortgage payment you’re confident you can pay, you understand your loan, and that you’ve still got wiggle room in your budget to pay for your other expenses.
View more information: https://www.fool.com/the-ascent/mortgages/articles/3-signs-youll-come-to-regret-your-new-home-purchase/