We took a little break from the Mortgage Series last week. However, do not fear because were are back again with another edition! I already asked you guys if you were ready to purchase a home and we talked about getting our documents together. What’s next? Paying for the mortgage and all of the fees involed with a mortgage.
Since we brought up certain fees that will come along with a mortgage already, it’s time that we went into a little detail on the important areas. I wanted to address the three main direct and indirect fees that come along with a mortgage:
Direct fees with a mortgage.
There are fees directly tied into obtaining a mortgage and making your first home purchase. If you don’t account for these expenses then your first home purchase could end up a disaster. If you do calculate these fees then you’ll have a better understanding as to if right now is the ideal time for that home purchase.
This includes mortgage payments plus interest. If you don’t compare your salary to your other expenses along with your mortgage, your home purchase could be a financial mess. I personally opted to make bi-weekly payments on my mortgage. I also get paid bi-weekly at my current job. This means that I need to consider my mortgage payment before I decide to make any other purchases (like a Spring Break trip next year).
This ranges from property taxes to maintenance fees. I was watching a real estate show on the HGTV channel in Canada a few months ago. The couple was looking to purchase a town home. At the end of the episode they finally found a town home that met their needs. The location was perfect and the couple fell in love with the actual property. There was just one issue. This property came with maitnenance fees. The maintenance fees were a crippling $400 a month. Yes, an extra 400 hundred bucks on top of your mortgage. Heaven forbid you plan on eating or going out at all. Please consider all property fees when planning to apply for a mortgage. Maintenance fees in most condos can be very expensive and crippling.
Lawyers don’t work for free. When you first apply for a mortgage you’ll find that the lawyer working with you is extremely helpful. This is because they plan on charging you for everything. I remember being billed for every phone call/fax. You should at least save $1,000 for a lawyer when working on closing a mortgage.
These are the three main direct fees that come along with a mortgage that I wanted to address today. Of course you’ll also need to consider the involvement of a real estate agent in this mix.
Indirect mortgage-related fees.
Now that we looked over the direct mortgage fees, how about those indirect fees that I mentioned? The next issue that you’re going to have to cover is figuring out if you can pay the indirect fees that will come your way now. The three most common indirect fees here are:
Now that you have your own place you’re going to want to spend some money on the items in your property. You’re going to want a new flat screen tv. You’ll be tempted to design every room in the place to look the way that you want it to. Simply put, your consumption will increase. You’ll be spending more money than when you were renting.
Repair related work.
Even when you purchase a brand new piece of property from the developer, you’re still going to have to do some construction related work. From changing up the look of the backyard to setting up a bar in the basement. Every home owner feels motivated to perform some sort of repair work around their new property. These are all additional fees that will come along with holding a mortgage.
You’re going to have to take care of your new property, especially if you want it to increase in value for a future sale. Then there’s maintenance like shoveling the snow or cutting the grass. This won’t directly cost you too much money, but it will certainly eat up a lot of your time. Do you have the time to spend? Will you outsource these activities?
Rarely do potential home owners look over all of the fees that go along with acquiring a new mortgage. Are you ready to cover the many fees that go along with a mortgage? Where do you stand right now?
Check out the rest of the Obtaining a Mortgage Series:
(photo credit: dyntr)