I'm a college student who is planning on buying my first home within the next few years. I'm almost certain that this will be a starter home that I will need to resell in a matter of years. I prefer loans that have no penalty for paying more each month, but since I won't be paying the mortgage in full, is it recommended to pay as much as I can before I sell or would that be wasting my money? I'm still learning about the ins and outs of home ownership and any feedback would be greatly appreciated.
Investing in your mortgage is never a waste of money. When it comes time to sell, you'll be able to make an even larger down payment on the next place. Although, just because you anticipate moving doesn't mean it will happen right away. My "starter home" was 10 years old when we sold it. The equity that we had built up through additional principle payments paid off.
Make certain your mortgage allows for early payments towards principle. Additionally, you may need to either write out an additional check for principle only or verify that your bank will put any extra amounts to the principle. As unbelievable as it sounds, one month had our old mortgage company applying our extra to the next month's interest!
Good luck with your first place!
I agree with TauLepton!
Yes, no matter when you sell you will profit from increased equity. Don't let the 'tax on mortgage interest' folks dissuade you. Even the first year, on a starter home you probably won't have enough interest to itemize deductions.
Just keep those interest rates in mind. Don't pay off a 6% mortgage while you have credit card debt at 12%. In fact, make it a part of your plan to pay NO interest except for mortgage interest.
Stay out of credit card debt, keep reading ThriftyFun, and you'll have a great life.
If you are thinking of selling the home in three years or less, please look at your mortgage's prepayment penalty clause. On some mortgages, you can end up paying 6 months of interest (or more!) if you sell before a certain time period.
You usually can disallow the PPP in the contract, but that will probably drive up your costs.
Note: A few states do not even allow mortgages to contain a PPP, so please check with your local laws.
Also, please make sure to get EVERYTHING in writing, and ask a trusted friend/family member/attorney to read everything before you sign.
Keep good records of what you paid and the date. Our old mortgage co. messed up royally more than once.
All it took was for me to say that I mailed check #--- on a certain date for a specific month for them to straighten it out. Also, if you are writing checks, write down on it the month the check is covering as a note.
For instance, suppose you mail a check in early Feb. Is that check for the Feb. or the March payment?
Just because you haven't made the Feb. payment yet don't figure that the mortgage co. can figure it out correctly. They might just apply it to March and then inform you that you skipped the Feb payment so they are going to charge a huge late fee.
Not every mortgage company is this disorganized. But it still helps to keep a list of payments and dates.
I mailed in an extra principal payment per year for several years, and a few of those years had it credited to interest - even though I wrote a note explaining what it was for. So I learned to call on the phone a week after making the extra payment to make sure it went where it was supposed to go.
it is just as important to do your homework as to the home you will buy e.g.i bought a run dowwn house on a large block of land with a frontage to the rear street.i am at present sub dividing and hope to make about$ioo,ooo tax free because it's my pernamet home.tip do it 3 timesand the next house is paid for
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