With interest rates low and home prices beginning to level off, now is a great time to buy a home. Should you stretch your budget to buy the exact home that you want? This article, plus a good mortgage calculator, can help you find the answer.
Is bigger better when it comes to buying a new home? There are several schools of thought behind buying a house that stretches your budget. One says that buying a bigger house now will make you less likely to move in the near future. Another says that your income will eventually grow and catch up with your loan payment. With the help of online mortgage calculators, you can determine which dollars make the most sense.
Pay now, don't move later
Strategically, it makes sense to make yourself "house poor" when you buy a home. The amortization on a house-provided you get a fixed-rate loan-will not change, so that gives you a nice hedge against inflation. In theory, you'll eventually start earning more money in your career while your loan payments will remain the same.
Chances are also good that you'll grow into the space of a bigger house. With a little added elbow room, you won't have to move anytime soon. That will save you big bucks on moving expenses and fees for a new home mortgage loan in the future.
Get bullish on your future
You may also want to consider stretching your budget if you can see a big personal income surge on the horizon. If this is the case, consider an interest only loan. This instrument delays payments on principal during the early years of the loan, giving you much lower monthly outlays. In theory, when your ship comes in, you'd have the paycheck to match the deeper financial waters that you'd be navigating.
Playing the numbers
Crunch some numbers and find out just how much you can stretch your budget. There are many on-line mortgage calculators that are free and simple to use. Consider all the different loan options, including the one for interest-only mortgages. Ultimately, make sure that you don't stretch your budget to the breaking point, and that you have the income to keep your finances in tip-top shape. Stretch is great in a limousine; it may not be so great for your budget.