Congratulations On Buying Your First Home!
This is surely a great achievement for you and is a one of life’s milestones that you should be very proud of reaching. Instead of paying someone else for where you live as a homeowner, you start to build solid equity – You can think of it as paying yourself! With time and the build up of equity, there’s much you can accomplish now that you have this asset in your portfolio.
With owning a home and having some equity in it, stepping up from a starter home to a home that is closer to a dream home should only be a matter of time.
But what you’ll now realize, however, is that your bank account has started to behave erratically! You’re seeing money moving out of your account faster than ever before. Or so it seems.
What you’re experiencing is a clear case of a budgeting dilemma for a first time mortgagee. It’s completely normal to feel like you’ve lost some control over your finances now that you’re a home owner. Other than just the mortgage their are many other things that you will now have to pay for.
The good news is that you can adjust and adapt to what will probably need to be a retooled budget. Since you already have a budget habit, it should not be too difficult to get things under control in a relatively short period of time. Managing your budget as a homeowner will certainly be necessary for a positive mortgaging experience.
Steps To Take To Manage Your Budget With Homeownership And A Mortgage
1. Make Your Mortgage Payment First.
Nothing shocking with this statement, If you want to continue to hold on to your home, ensure you pay your mortgage on time! Remember the home is yours and you want to keep it that way. As soon as you get your pay check, withdraw the amount you need for your mortgage.
- A great idea is to set up an automatic payment to the mortgage lender from your bank account. That way, you won’t have to worry about remembering to make the payment each month.
- Sure, things come up, but defaulting on your mortgage payment could mean not having a roof over your head!
- Check with your lender to see how they calculate the interest charged. It can be that if you make weekly payments, you can pay less interest overall and finish with the mortgage sooner.
- Also check if you can make extra payments to lower the principle owed. Even adding an extra 25.00 dollars to a 475.00 dollar weekly payment can make a difference and save you time and money over the life of your mortgage.
- Once you have built up some equity, it can be very tempting to get a home equity loan but do not do this. Avoid using the equity in your home as a cash advance. Stay as far away as possible from taking on any additional debt.
- See more information and links at the end of this article for thoughts about when and how much you pay your mortgage.
2. It’s Really The Time To Prioritize Your Other Expenses.
With the mortgage payment out of the way, you now have to manage all of your other expenses. Now that you have a mortgage, your priorities may likely shift (Helpful Hint: You have better re-prioritized your other expenses!).
- All expenses related to the new home are important. However, you need to figure out for yourself if all of them are necessary right now. Focus on the recurring monthly expenses that contribute to a comfortable dwelling.
- Social time is certainly important too, especially when it comes to maintaining your sanity! But try to cut down on entertainment expenses. Instead of going to the movies 3 or 4 times per month, only go out once per month and get the rest of your movie fix in your new home.
3. Schedule Home Maintenance And Improvements.
As a new homeowner, you’ll have the ongoing need to maintain your home as well as the desire to make your home more suited to your tastes. While your pride of place is admirable, it’s important to let your better senses rule!
- Make a list of all your home maintenance and improvement needs and wants.
- Prioritize them, with the ones that make the home safe and livable taking precedence over the other wants or wish-list items. If you have a TV now, a new larger TV or surround sound system can and probably should wait.
- Put a schedule in place for accomplishing everything, and tie that into the associated expenses. Your goal here should be to commit the same amount of money each month to home improvement.
- If there’s something you aren’t able to afford this month, simply leave the rest until next month.
4. Stick To Your Budget.
Chances are the fact that you were able to purchase your home was because you set up and maintained your budget. Continuing your budget habit is a must and is even more important to do now that you have a mortgage to pay. Your finances will probably be tighter so sticking with your budget and really clamping down on your spending is crucial. Keep your eye on the prize and manage your finances like a hawk. Every penny counts now.
5. Make Continued Saving A Priority.
With all that can happen as a new homeowner, it’s more important than ever to set aside money in your savings account. Major repairs sometimes need to be taken care of immediately.
- Have the discipline to put aside untouchable savings. This way when something pops up, you will have funds to cover financial surprises. And know that sooner or later, something will come up. Be ready and be prepared.
- Keep a percentage of your savings in cash but not in an account that you use everyday. Having some funds liquid and accessible will ease the stress when emergencies occur.
Add Money To Pay Down Your Mortgage Or Is It Better To Invest The Money That Would Go For The Extra Mortgage Payments?
Once you have your budget managed and you have financially acclimated to paying a mortgage and for the related expenses, this is the question that many homeowners wonder and think about. So, regarding the suggestion posted in point one above about making extra payments to your mortgage.
There seems to be two camps regarding this suggestion.
Camp One: Suggests to pay any and every extra dollar into your mortgage and do so as often as the payment has an affect on the principle that you owe..
Camp Two: Says that you should lock in your mortgage for 30 years and invest the difference you would have paid if you signed a 15 year mortgage. Camp Two also suggests not to make any extra prepayments of the mortgage.
Which of the two Camps to join and is best for you and the current situation depends on many variables with – The biggest variable of them quite possibly being you, yourself.
What Is The Story?
In making your decision, you need to consider the current economic conditions are and what the mortgage rates are at the time that you sign the mortgage. Even more importantly you need to really know your temperament for how your prefer to handle the two main ideas on how to pay your mortgage.
If any amount of debt weighs heavy on you, then paying off the mortgage as quick as you can may be the way to go. Also, if you are not the type that can handle risky investments like stocks, mutual funds or any other types of non-guaranteed investments, then paying extra to the mortgage may be the best way for you to go.
Leave Your Savings Alone
If you do decide to sign long and invest the difference, you also need to consider your ability to hold onto the savings that have accumulated in your investments. If you are the type to dip into and access your savings, then it may be best if you just use your money to pay down your mortgage.
These are serious financial considerations that you need to make. In order to get ahead and reap the benefits of either of the two suggestions for handling your mortgage, and for whichever of the two approaches that you choose to do, you will need to stick to the plan as much as possible and as best as you can. Whichever plan you choose, you need to stick with it.
How Risk Averse Are You?
The investment solution does seem appealing and just may be the better way to go, but there is also the amount of your money that can be saved over time when adding extra dollars, today, to a mortgage. To make the choice, you need to figure out your level of Risk-Aversion. Do you prefer the “sure-thing” or are you okay with taking some chance? You have to answer this question for yourself.
In order to get a start to having a better understanding about these topics and then being able for you to see for yourself if they make sense to you and your situation, for a more detailed explanation of these ideas be sure to review the two web articles listed below:
More Info About Camp One – Every Dollars Impact On A Mortgage:
Link to TheSimpleDollar.com Article
More Info About Camp Two – Don’t Make Extra Mortgage Payments:
Link to InvestorJunkie.com Article
Conclusion
Mortgaging a home for the first time can leave you stressed and anxious if you aren’t able to manage your budget effectively. You must be able to stick to your budget and be aware of where and what else your money is going to. Simply put, now more than ever, you must pay close attention to the spending of every dollar, if not every penny!
Do not ever forget that even with paying a mortgage, you still need to continue to maintain and even grow your savings. Once you’ve mastered that, you should be able to feel comfortable knowing the financial responsibilities related to your home and your life are well looked care of!
BAM! Be A Man. Do The Right Thing. Take Care Of Yourself And Your Money
BAM! Be A Man. Do The Right Thing.
Be The DtRTy Guy!
