Your House

If you are just starting out and are looking to purchase your first home or you want to reduce your mortgage payments and pay-off your mortgage sooner, one option is to purchase a property that has an income component to it that you can rent out. This could be a property with a self contained in-law suite with its own private entrance, kitchen, bathroom e.t.c, or you can rent out a spare room in your home to a tenant that you have taken the time to screen properly for compatibility. The goal is that you apply the rent payments you collect each month towards your mortgage, which will result in you reducing the number of years and interest you end up paying on your house.

Do you know that depending on the interest rate, if you make the minimum payment on your mortgage each month and do not include any extra top-off amounts, you end up paying almost as much as your initial purchase price of the house in interest ! For example if you buy a $200,000 house and your mortgage is 5% amortized over 25 years, you pay $148,963 in interest. (For a grand total of $348,963).

However when most people are asked the price of their house (if the scenario above was theirs) they would say $200,000 instead of $348,963.

Bottom line, the sooner you can pay off your house, the less interest payments you end up giving to the bank = more money in your pocket.

17 Responses to Your House

  1. Priest says:

    Knocked my socks off with knowledge!

  2. Jaydee says:

    With the bases loaded you struck us out with that answer!

  3. Don’t forget one of your household’s largest mandatory monthly expenses – INSURANCE.
    Your mortgage requires that you have insurance on your property to protect you against any accidental loss ( How would you live if you had to continue to make mortgage payments on a destroyed home AND pay rent/mortgage for another property??)

    Your Auto insurance is also mandatory BY LAW (at least the liability portion) and by agreement with any lienholder (with minimum collision and comprehensive deductibles.)

    Take care and effort in deciding who to go with and do not be shy to shop it around – Not all companies are a perfect fit for your current home situation or as that situation changes, may not be the best for you down the road. (Anybody have children near driving age or going away for school?)

    Price, although an important driving force in the decision making process, should only play a partial role in your decision.
    Do you want to be able to reach a specific person to deal with your issues? – If so, stay away from call center insurance companies.

    You are putting your families possible future well being in the insurers and the individual advisors hands – have a good level of trust in what they are covering you for is what you need for your particular situation.
    Will they go to bat for you? (can they?) The person and the company does make a difference.

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