Found A Home For Less Than What You Budgeted? Use Your Money Wisely
With low interest rates and homes selling for very low prices, there are many home buyers who patting themselves on the back for getting a great bargain. If you are one of these people, what are you going to do with any spare cash? Historically, the wise choice was to put that extra money into your home purchase. This reduces the size of your mortgage and can save many thousands of dollars over the life of the loan.
Most readers would ask, “what spare cash?” If you have budgeted say $250,000 for your home, and you are going to close on $200,000 – that’s a saving of $50,000 on your budget. At 10% for a deposit, you have $5,000 to play with. Some people are wise, and put that onto their deposit. Others use that extra cash to furnish their home. If I were you, I would check the interest rate on my credit card first. Interest rates are up around the 30% mark at present, so it may make sense to pay off as much as you can from your credit card, and to put it away and only use it for emergencies. Your mortgage is already going to be lower than budgeted, this provides additional savings each month – apply them to your credit card account and you are saving 30% in interest fees.
Better yet, find out if your mortgage provider has a credit card linked to your mortgage. These credit cards can come with bonuses such as lower interest rates for the first six months, lower annual fees and a redraw or offset facility on your mortgage. By paying off your high interest credit card account and moving to the linked credit card, you can save on interest fees while making use of any additional mortgage payments you make.
Having a smaller mortgage will generally provide the better long term benefit, however, given high credit card interest rates, and low mortgage rates, it would be wise to investigate whether paying down your credit card is a better option right now.
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