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For most people, a mortgage represents their largest monthly expense. If there has one thing that has become clear in recent times, it’s the importance of achieving financial stability. Wouldn’t it be great to launch a strategy that eliminated the need for a mortgage payment?
In the last few years we have witnessed an extremely volatile stock market combined with the economic ravages of the pandemic. Now, more than ever, it’s important to consider stable investments which will put you in the best possible position to weather future, unforeseen circumstances.
Many people become so ambitious in the pursuit of wealth that they end up overextending themselves and losing everything. Although it may be your aspiration to build a skyscraper, you can’t get so focused on your plans for the 100th floor that you neglect to fortify your foundation. In reality, the foundation needs to be your primary emphasis because it keeps you from ever having to start from nothing again.
One of the best things to do when you’re developing your strategy for financial freedom is to consider how to build equity from the inevitable expenses of life. No matter what happens to you or how much success you eventually achieve, you are always going to need a place to sleep. Purchasing a home doesn’t eliminate the rent expense, but it does allow you to leverage your rent expense and make it work for you.
In the last few years of market volatility, I’ve been committed to using extra funds to make additional payments to my mortgage. The thinking is that when the house is paid off, I can better handle the loss of a job or other unexpected expenses. It’s important to note that this has been a long term philosophy. First, I bought a house at the bottom of the market. Second, I selected a house that cost approximately half what the bank said I could afford. Third, I selected a 15 year mortgage. Fourth, I have paid extra into the principle throughout the duration of the loan.
Before you look into a home, it’s important to spend some time with a simple mortgage calculator like this one. Don’t make the mistake of thinking that the loan advisor at the bank is your friend. It is in the interest of the bank that you receive the maximum loan that you can afford, and if you aren’t careful, you might lose your financial flexibility to pursue other interests or have a cushion for unexpected expenses.
With mortgage calculators you can get a very good idea what your monthly expenses are likely to be. Tax and insurance fees might fluctuate slightly over time, so listen to your gut instinct. If a sixth sense tells you that the amount shown from the calculator might be too difficult of an obligation to meet, then don’t sign for the loan.
After picking a life partner and having a child, purchasing a house is one of the biggest life decisions you’re likely to make. The better prepared you are to navigate the requirements of the loan, the better your chance at building equity and taking a massive step towards financial freedom.
You are always in a better negotiating position if you maintain a position of flexibility. When you are looking at houses, run the numbers multiple times. Don’t take your loan officer’s word on anything without independent verification. Listen to that voice inside your head that questions whether or not you can afford the loan. Select a loan that you can afford and which gives you the financial flexibility to pay it off early. A home is a great investment. With proper planning, you can be assured that your loan will be the first step on your pathway to financial freedom.
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