05-31-2006, 03:27 PM
Hi,
The idea is to roll as many of the initial expenses into the home loan as you can get by with, keeping as much of your ready cash in reserve for the unexpected. Of course, this is based on having a loan with no pre-payment limitations or penalties. Then, after the dust settles, you've had a chance to adjust to your new budget, and when you think most of the surprises are behind you decide how much of that reserve to pay as a lump sum toward your principle. You'll effectively have gotten a very cheap short term loan for your immediate needs without the additional hassle of applying for it.
And, although it is a little early to talk about it now, be sure to consider adding a bit to your monthly payments. This additional prepay really brings a loan down fast since it is 100% applied to the principal. If you look at an amortization table, you'll see that the first few years of a loan most of basic payment is interest.
Probably more advice than you need or want:)
--Pete
Quote:We ended up qualifying for a lot more than I expected, and a lot more than we'll need.That's good, it gives you a few nice options. For instance, if you find a house that's perfect except that it needs a new roof, you can make the replacement of the roof part of the deal, increase the purchase price by the cost of replacing the roof, and get that roof job financed as part of the mortgage at the mortgage rate which is usually much cheaper than the price of other loans, even home improvement loans. Heating, A/C, major repairs or improvements are all candidates for this technique. However, avoid doing this on minor items that have a relatively short lifespan. You don't want to pay for thirty years for something that you'll probably replace in seven.
The idea is to roll as many of the initial expenses into the home loan as you can get by with, keeping as much of your ready cash in reserve for the unexpected. Of course, this is based on having a loan with no pre-payment limitations or penalties. Then, after the dust settles, you've had a chance to adjust to your new budget, and when you think most of the surprises are behind you decide how much of that reserve to pay as a lump sum toward your principle. You'll effectively have gotten a very cheap short term loan for your immediate needs without the additional hassle of applying for it.
And, although it is a little early to talk about it now, be sure to consider adding a bit to your monthly payments. This additional prepay really brings a loan down fast since it is 100% applied to the principal. If you look at an amortization table, you'll see that the first few years of a loan most of basic payment is interest.
Probably more advice than you need or want:)
--Pete
How big was the aquarium in Noah's ark?