Suze Orman’s Top 5 Mortgage Tips
Sometimes you just want to hear it from an expert. For many in the United States, television personality and finance guru Suze Orman, is this expert. From personal finance to investing, Orman has opinions on everything.
One subject on which she has become poetic is that of mortgage loans. And that makes sense, because mortgages are the biggest debt most US residents carry.
Orman’s advice is abundant and widespread. Between television, books, radio, and blogging, it can be difficult to find your best advice. So we’ve done it for you, putting together our list of some of his best mortgage tips.
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1. Comparison store for the best mortgage
The average first-time buyer can spend months searching house after house until they find the right one, then turn around and accept the first mortgage offer they receive. This may result in the payment of interest and fees that are higher than necessary.
Orman suggests going to at least three different mortgage lenders so you can compare offers. You should look at both large national banks, as well as local banks and credit unions, as smaller lenders can often have better mortgage rates.
Once you have the offers in hand, perform a side-by-side, line-by-line comparison of each load and total costs. Then you can select the best deal for your needs.
2. Polish your credit before you buy
Your credit scores and your credit history can have a big impact, not only on getting a mortgage, but also on how much you can borrow and what it will cost you. Orman advises all future homebuyers to spend time seriously assessing their credit at least six months before needing a mortgage.
With a typical 30-year mortgage, you can easily end up paying $ 50,000 or more in interest charges, so every fraction of a percentage point counts. If you can raise your credit score enough to propel yourself from average credit to good credit (or better), you could potentially lower your interest rate from 0.5% to 1%, which will really add up. over the term of your mortgage.
3. Negotiate your mortgage costs
There is no shortage of costs associated with buying a new home, and many of them relate to your mortgage. But the numbers you are given don’t have to be the whole story.
Orman recommends that new buyers negotiate their fees and shop around when possible to ensure they get the best rate. Some of the fees, she says, can be negotiated:
Some of these fees are one-time, but others are regular fees that you will pay for years to come. Even a small win could translate into huge savings over time.
4. Get a shorter loan, especially when refinancing
While the gold standard for mortgages today is 30 years, that is not the only option. And Orman thinks more people should consider breaking with tradition by opting for a shorter loan term.
The longer a loan lasts, the more expensive it is overall in terms of total interest charges. So by the time you pay off your 30-year mortgage, the cumulative interest charges could end, meaning you’ll pay 50% more for your home.
However, with a 15-year mortgage, you’ll pay off your loan in half the time and save more than half the interest. Of course, the downside is that you will have a higher monthly payment. But if you can swing the highest payout, it may be worth it in the long run.
Orman also advises anyone considering refinancing a loan to avoid taking another 30-year loan, especially if they have already paid off their mortgage for several years, as this can significantly prolong payments. For example, if you’ve already been making payments for 15 years, refinancing with a 30-year loan could extend your home’s payments for a total of 45 years.
5. Prioritize mortgage repayment before retirement
As people approach retirement age, common wisdom is to put as much money into your retirement accounts as they can hold. But according to Orman, you might want to rethink this plan if you still have a mortgage.
Orman says homeowners nearing retirement should focus more on paying off their existing mortgage than on a dime in the bank. Not only will your finances appreciate not having a mortgage payment every month, but you will also have the added peace of mind in retirement that you own your home free and open.
She adds that you shouldn’t stop contributing to your retirement fund altogether, especially if you have a partner business. Instead, contribute what you need to get the same amount as your business, but invest the extra money in your mortgage when possible.
Mortgage like a pro
Buying a home will likely be the most expensive purchase of your life, which means the mortgage you use to make it will be just as important. But mortgages shouldn’t be scary. With a little homework – and some professional advice – buying a home can be a smooth process without the nasty surprises you read online.