Most of us that own a house, purchased it with a mortgage. Until the house is paid off, the house truly belongs to investors. Generally, after you purchased a house with a mortgage, the bank sells the loan to Fannie Mae. Fannie Mae bundles up these mortgages which are offered as a means of investments to investors. You would make the monthly payment to your bank that originated the mortgage but the bank doesn’t carry the mortgage for long.
You don’t own your house until it is paid off:
Many people don’t pay the house off in the US.
Few months after, we purchased our house, we received a letter indicating that Fannie Mae took over our mortgage but we would continue paying the bank that granted us the mortgage.
Few years later, the bank sold our mortgage it doesn’t own at that point to another mortgage company to which we were required to make payment. I called the new bank and ask them questions. I was told that it is common that banks periodically sell some mortgages to other banks. There was not much I could understand in their processes but I knew my house should not be investment tools for banks to speculate on. It is a shelter for my family. For day one, I convinced my husband that we should pay more than the minimum mortgage every month and we did. I told him that I would be in charge of paying the mortgage every month while he pays other bills. Every year I would increase it about $50. After all, if we were renting, the rent would have gone up every year or so. Few years later my husband and I decided to live on one income and pay the mortgage with the other income every month unless there was other needs to meet.
Don’t refinance your house if it is not necessary: It may not save you money
We have received many offers to refinance our house to save money. After I run the numbers one time, I remarked that it doesn’t save us much at all. The reason was we pay more than the minimum every month toward the mortgage. To refinance, we have to pay 3% down payment and closing cost, a cost the lender doesn’t emphasize on much but why would I pay a lender to tell me that I could pay my mortgage within 15 years for few interests point down? Every situation is different. If you are paying more than a 15 years mortgage minimum would be, I don’t think it is necessary to refinance from 30 years loan to a 15 years loan unless the original interest was too high compared to the 15 years one. In my case, a 15 years loan would be less than 1% lower than my 30 years loan. Run your numbers first. Ask questions and write the answers down. Read them and make your decision.
Do not apply for home equity loan: Your house should be your shelter not your bank
We have been offered to borrow against our house by our mortgage company. It would add flyers along with the mortgage statements that describes many things we could do with that extra cash like paying off debts, remodeling the kitchen and so forth. Do not borrow against your house. Mortgage companies sell mortgages not houses. They expect homeowners to live in constant debts. It is our job to know that our house is our shelter. A house is an asset that increases in value. We should not borrow against it to pay for thinks that are not assets.
Purchase a house to meet your needs not your wants:
When we were shopping for our house, we were approved for $150,000 loan. We purchased a house below $125,000.
A house is an asset but a house you live in, doesn’t generate money. It costs you money to maintain it. You want to purchase a house that won’t tie down all your income and keep you from investing. If you purchase a house you need, you would be able to pay it off quickly and save more to invest in rental properties. Rental properties generate monthly cash flows which diversify your sources of income. They also increase in value, increasing your net worth. If you purchase a house that is too expensive to live in, you may not be able to save enough to invest toward real assets. The bigger the house, more it costs to maintain it. It might require you to hire a cleaning clue sometimes. A large home would cost more the replace the siding, to paint, to replace the roof compared to a smaller house. My husband and I were able to paint our siding without hiring a painter. It is a ranch style house and we didn’t need a tall latter. Our house is about 1,000 square feet. We have one car attached garage. The garage door replacement cost would be about $700. If it was two cars garage door, it could have cost us more. I don’t hire any one to clean my house. I clean it daily within few minutes.
Do not remodel your house unless you paid it off
Until your house is paid off, you don’t really own it but investors do. Any money you use to remodel it, is spent to improve investments for investors. You want to be an investor yourself. You cannot become one of them if you keep giving them your money without earning anything on it. Our house was a fixer upper when we purchased it. It required many updates. We focused on the most important ones.
We purchased a laminate flooring to replace the carpet in the living room. We purchased vinyl tile to floor the bathroom and kitchen. We wanted true tiles but decided we could do that later. We purchased vinyl tile on sale to floor the basement floor to avoid stain on our feet. The cabinet in the kitchen was outdated but I just painted them. The kitchen counter was old but didn’t have any issue. We still have it. The wall was stained with cigarette stain. We painted it heavily. The basement wall was bowed a little. I filled the crack and painted the walls. We got quotes incase we decided to fix it but it was not a necessity as we thought at the beginning. Radon level in the house was high. We hired a professional to do the mitigation. It was a need and we took care of it. The bathroom needs a fan. I don’t like mold between the tile wall but I just open the window to improve air circulation. We would install the fan when we save for it. The siding rotted at different areas of the house. We were advised to replaced it. Our previous landlord advised us to use wood potty to fill holes and paint over. It was the best advice. We did it and have not changed the siding yet. We have been leaving in the house for 5 years. I like granite kitchen counter and remodeled bathroom but I don’t need these changes yet. Therefore, I focus on paying the mortgage first. Banks view homeowners, low risk that’s why they can lend you money for the house you would live in and only requires as low as 5% down payment. They know homeowners would focus on spending their money improving the house over and over thus increasing the value of the house. They would even allow you to borrow some of the home equity to remodel the house.
A neighbor that lived in a house next to us, made a lot of changes in their house. They are acknowledgeable with construction works and put tiles in their kitchen floor and replaced the kitchen cabinets and counter after living in the house for few years. They made a lot of changes two years before they moved out. They lived in the house for about 5 years and moved to a brand- new house built for them. The new owner within two years, replaced the floor in the kitchen, bathroom, and living room. The new floor put down by the previous homeowner was not used for long but could have played a role in the selling price of the house. Unfortunately, it didn’t suit the new owner’s taste even though he could have paid a higher price for the house due to these renovations only to tear them down two years later. In my house, when something requires attention, I ask myself when the previous owner have replaced it? Our garage door cable broke and the professional didn’t want to fix it. We were told the garage door was too old and we needed to replace it. When my husband shopped around for quotes, a company has the address in file. I told my husband to ask them what work they did for the previous owner if they replaced the garage door and what year? They didn’t have enough information for us but said that they were not the one that installed the garage door. They just fixed an issue.
Each time you remodel your house, incase you paid it off, you are making money for investors that own it.
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