Two Methods To Make A Huge Saving When Buying Your Home

March 16, 2009 by  
Filed under On Your Mortgage

There is no doubt that purchasing your first property is the most important and exciting business transaction you will ever make. Getting on that first rung of the ladder transports you into a whole new world of ownership and with it brings stark financial responsibility. Your mortgage can span anything up to 30 years depending on how much cash you can spare towards the initial endowment and your credit record must be as good as pristine.

Maybe you are reasonably well off or are struggling a bit, either way you still want to obtain the best deal you can and save money where possible. When buying your house there are two main methods that will increase your chances of saving money and effort, these are, owner financing and an assumable mortgage from the existing owner.

An assumable mortgage is where you have the opportunity to take over the existing mortgage of the previous owner along with the same interest rate they have. In most cases this interest rate will either be equal to or lower than the current rate helping you save. If your lender approves of the assumable mortgage then the mortgage is yours.

However, there can be a case where the entire cost of the house is not covered by the assumable mortgage where the seller is selling the house for a higher price than the mortgage. In this case, you, as the buyer will have to finance the additional sum either by taking a loan or paying in full. The lender may have different terms for the additional loan due to the current market conditions and your credit rating.

Moving on to the second method owner financing is dependent on two factors – that the buyer cannot obtain a mortgage loan and the owner is keen to sell the house as quickly as possible, however, it is probably a shrewd move for the buyer to investigate the reason for the hurried sale of the house.

This agreement includes the buyer paying monthly instalments to the seller of an agreed sum and often at a reduced rate compare to that of a traditional lender. There is no risk of loss to the seller if instalments are not made as the house itself stands as the security and should the buyer default the seller regains ownership of the home.

This method also gives benefits to both parties involved where the seller saves on capital gains tax and the buyer saves money on private mortgage insurance and other expensive lender fees.

When times are hard it is possible to draw upon other resources and methods for buying your house and avoid some of the heavy and costly load it brings. Lenders are happy to help you in your quest to buy your first home but they are also happy to give your wallet a spring clean.