One of the major reasons why many people tend to be apprehensive about mortgages is the fact that if they are not handled properly, you could end up losing your house. This can be particularly distressing for people who have young families, in which case the loss of the home could deal a major blow to the entire family. However, this is not enough reason for anyone to completely avoid getting a mortgage. There are several ways to dramatically reduce the chances of such catastrophes from happening. Some of these methods include:
Get everyone on board
If you are thinking of getting a mortgage, it’s not wise to do it without the input of the other family members such as your spouse and older kids. Remember, this is a major investment which will need a long term commitment from the family. Consulting the other family members will help them understand this commitment, and can also help them adjust to some of the lifestyle changes that might come with it. For instance, if it turns out that you need to cut back on your spending, the fact that the other family members know how much you need to pay for the mortgage each month will make it easier for them to adjust to this.
Involving the other family members will also help in avoiding any nasty surprises in future. In the unfortunate circumstance of the breadwinner’s demise, for instance, having the family find out that they have a huge outstanding mortgage debt to pay could destabilize the family.
Commit to getting insurance
For most people, getting life insurance and other forms of cover when they already have to pay the mortgage can be financially demanding. However, it might turn out to be the one thing that saves the family in case of injury or death of the individual paying the mortgage. One of the ways of minimizing the cost of the insurance would be to get a policy that will cover the duration of the mortgage. This way, it will expire once the entire mortgage is paid off. In addition to that, you can also limit the policy value to just above the value of the mortgage. This way, you can pay the minimum amount in premiums, but in such a manner that the payout value would be enough to settle the whole deficit.
Thoroughly understand the terms of any mortgage before signing for it
If you have found a mortgage that is good enough for you, chances are that you will only focus on issues such as how much it will cost. However, if you are keen on protecting the welfare of your family, it is important to understand all the terms of the mortgage.
For instance, if the breadwinner in the home passes on, how will this affect the mortgage? Would the mortgage company be willing to give the rest of the family a grace period during which they would not be obligated to pay the mortgage as they try to sort things out? Would there be any room to have the terms of service renegotiated? The answer to all these questions and more often lines in the agreement that is signed between the lender and the applicant. However, it’s also encouraged that one consults the employees at the mortgage firm in order to gain some clarity regarding this.
Once you have all this information, it’s also wise to disseminate it to the other members of the family as needed. For example, you could decide to give this information to your spouse. This way, they would know how to deal with the mortgage company in case you are not around to do so for some reason.
Avoid getting mortgages that will stretch your limits too much
The major reason why many families end up losing homes on account of not being able to service mortgages is because they took on more than they could handle. For instance, if you find that your mortgage is structured such that it drains all your monthly income, it would place your family at a compromised position. In such a case, you could opt to negotiate for longer payment periods, so that the amount that is committed to the mortgage every month is reduced.
If you have a family and are getting a mortgage, a good way to keep them relatively secure is by ensuring that there is a surplus in terms of monthly income. This can then be invested in a savings vehicle that will earn an interest, and which will also provide a pool that the family can use in case of emergencies. Doing this also reduces the risk of defaulting on the mortgage which might increase how much you eventually spend on it.
By taking all the above pointers into account, you will be in a much better position to get a mortgage and reduce the financial risk that this might place on your family.