A mortgage is one of the biggest debt Texans — or any other American for that matter — will get and have to go through. It only makes sense to explore your options with the right mindset to make a decision you won’t regret down the road. If you’re planning to make one of the sought-after Corpus Christi or Rockport homes your next residence, understand these mortgage truths first:
Primary Residence is Not an Investment
Don’t consider your house as a way to grow your money over time. Sure, the real estate value in your chosen market may increase over the years, but there’s so much uncertainty. Plus, it’s an illiquid asset, which means you can’t turn it into cash immediately.
When you don’t have a lot of emergency savings, it can be a bad idea to put down most of your money on your mortgage. If a recession happens and you don’t have funds for the rainy, you might lose your job and find yourself underwater.
A good strategy is to take a 30-year loan to lower your monthly repayment and invest some of your money in the stock market. This way, you’ll have a safer investment while you increase your home equity with time.
Prepayment Does More Harm than Help
As mentioned, your primary home isn’t an investment. Although you may have to spend more on interest in the long run, it might be better not to finish your loan early through prepayment. A fixed mortgage won’t change over time, so inflation won’t increase your payment. If you think about it, your repayments would even seem smaller if the value of the dollar decreases in the future. It’s wiser to keep your extra cash in your pocket than make the bank richer with it every time you can.
Finishing the Mortgage Doesn’t Mean Financial Freedom
Paying your mortgage off won’t erase and free up 100% of your monthly budget. The key to comfortable living is having a flexible cash flow. The more liquid assets you have at your disposal, the easier you can deal with regular and sudden expenses.
Unless you can easily buy a new home with cash, choose your mortgage carefully. Explore your options with the foresight to see which financial product makes sense for you now and in the future.