Plenty of Americans deal with mortgage debt. It may seem hard to manage your mortgage, especially if it is your first time having one. Luckily, it doesn’t have to be! There are some mortgage management tips that you may be able to benefit from. These tips come from others who were able to make the most out of their mortgage and professionals in the industry that have recommendations. However, we want to remind you that every mortgage is different and what may be best for you may not be best for someone else! So make sure to talk to a professional before making any big financial decisions if you feel you need some more guidance.
Understanding Your Mortgage
First, before you can learn how to better manage your mortgage, you want to make sure that you have a clear understanding of what your mortgage is. Obviously, you should have a pretty good idea since you signed the agreement for it but we will brush you up on the basics! Your mortgage is the loan that is used to purchase your property. When you enter into a mortgage, the borrower (you) agrees to repay the lender over the course of a set period of time. The payments you make to the lender are split between your principal balance and your interest. This is a secured loan because the property is collateral until the loan is fully repaid. There are a variety of different types of mortgages available, that all have their own set of pros and cons for your finances, lifestyle, etc.
How to Better Manage Your Mortgage?
The amount of money that a person will spend on their mortgage payment each month depends on their situation. However, people can typically expect to pay a pretty big chunk of change each month. Thankfully, there are some ways that people better manage their mortgage:
- Making a Budget
- Having Emergency Funds Ready
- Keeping Up with Your Mortgage Payments
- Consider a Refinance
Making a Budget
While this may seem obvious, many homeowners actually don’t have a proper budget together. Having a budget is important because it can easily show you how your mortgage will fit into your monthly finances. You will want to get together your expenses for the month. People can have a lot of bills that they need to deal with besides their mortgage like student loans, groceries, medical debt, credit card debt, a phone bill, utilities, and more. That is why listing out all of your expenses can be helpful so that you know what you need to deal with when paying your mortgage.
Now that you have a list of your expenses together, you will want to get together your monthly income. Once you know your monthly income, you can compare how much you are making versus how much you are spending. The leftover amount can be seen as “disposable income” which is income that is not actively being used. That means it can be saved or spent. After gathering all of the details of your financial situation, you will want to make sure you can make plans to keep your finances healthy.
Having Emergency Funds Ready
It’s good to prepare for the worst. When we say the worst, we don’t mean a zombie outbreak. Instead, we mean home emergencies like your foundation cracks, your water heater breaks, a window shatters, etc. Life is full of unexpected events. That means that you will want to make sure that if your home goes through something that needs a quick repair, that you will be able to handle that cost. A good rule of thumb is to have at least three months to six months worth of your total monthly expenses saved up as an emergency fund.
Keeping Up with Your Mortgage Payments
You want to make sure that you keep up with your mortgage payments. That’s because if you fall behind on payments you can deal with a wave of reactions. You may deal with late fees, your credit can take a hit and lower your credit score, and you can impact the relationship with your lender.
Consider a Refinance
Another way that you may be able to pay less on your mortgage is to consider a refinance. Refinancing your mortgage can help you save even more on your mortgage. For example, let’s say originally you got a 30 year mortgage with a 4% interest rate. After about 7 years (when you have 23 years left) you decide to refinance your mortgage. This gives you the chance to change your loan terms down to 15 years and even refinance at a better interest rate of 2.9% (if interest rates are lower at that time). This can result in thousands of dollars of savings compared to your original loan terms!
Conclusion
In conclusion, managing your mortgage may feel overwhelming, especially for first-time homeowners. However, with a clear understanding of your mortgage, a solid budget, and emergency funds in place, you can take control of your financial future. Staying consistent with your payments and considering refinancing options when appropriate can also provide significant savings. Remember, each mortgage is unique, so it’s important to seek professional advice tailored to your specific situation. By implementing these tips, you can navigate the complexities of mortgage management and find a path to financial stability.
