What seems to be a common refrain among many millennials is that they are financially well-aware but don’t know how to make smart financial decisions. This is the attitude many of us have when we buy a house. The vast majority of people in my generation are well-versed on the value of foreclosures, bank loans, and personal finances. However, the majority of millennials don’t really know about the power of compounding interest.
The power of compounding interest is huge when buying a home. The more you pay for a home, the more you have to pay in fees. But compounding interest also helps you save on interest costs. For example, suppose you buy a house for $200,000. In the past you would have to pay a $100,000 down payment and you would have to pay a $50,000 monthly mortgage payment.
Today, you can buy a $200,000 home for 120,000 less than the price at which you paid for the house. Today, you can pay 12% less for a home. That means that you save $200,000 over the cost of the home. Of course, this savings doesn’t apply to the down payment.
For a long time the standard method for purchasing a home was to finance it first and then buy the home. This was a pretty standard way to finance a home because it allowed you to get a mortgage before you actually bought a home. But the problem with this method is that if you had a great credit score you would be able to borrow at a much better rate than if you had a bad credit rating.
According to the Financial Services Institute, the average home ownership rate in the United States is only about 60 percent. If your credit score is low to the point where lenders will not loan you money, you will find yourself in a bad situation. You can, however, apply for a home equity loan. These loans allow you to borrow against your home equity as opposed to your current mortgage.
This is all great if you have a low credit score, but if you don’t have a good credit score, it can be a big problem. Many lenders will not approve a home equity loan if your home is more than 30 percent in value. If you don’t have a good credit score, you’ll likely have to pay more in interest than you earn, or you’ll have to take out a larger loan to buy your property. That’s not much of a financial burden.
If you’re in a good financial situation, there is something that you can do to take out your loans. Take the first step, make a loan to your current home so that you can sell it for less if you have a good credit score.
The loan will be repaid over a period of time, and youll earn interest. On the first payment, you will be allowed to keep the equity that you paid in the loan, but on the next payment youll have to pay interest. This interest rate is about 6 percent on the first payment. As you make more payments youll be able to deduct more interest on your taxes, so if you have a good income, you should be able to save some money if you take this step.
It all starts with a credit application.
Finance King is a free site that allows you to post your credit score, and then the site will work with you to create a mortgage, a car loan, and a home equity line of credit. You can choose the loan type, length of the loan, and interest rate, and the site will then send you the paperwork for the loan. You can then apply for your loan online, and the site will provide you with the documents to show the bank that you’re qualified.
