Wait for the "lowest" rate and miss the
"lower" rate.
When the interest rates are low enough, you
should lock in to the already low rate. Waiting for rock-bottom interest is
extremely chancy. The majority of mortgage borrowers do not get the rock-bottom interest
rate. You are not only taking risk of missing the already low interest rate but also
missing the enjoyment of immediate lower payment.
Not having a clearly defined long-term financial goal.
Blindly saving money is just as bad as
blindly spending money. Not having a clearly defined long-term financial goal causes this
blindliness. If you are saving money now, what is your plan of spending the saved money?
If you are spending money now, what is your prospect of having the same money to spend in
the future? House ownership is probably the longest-term financial you have to deal
with in your life. Other than to live in the house, what is the financial goal of owning
this house?
Not having a clearly defined short-term financial goal.
If you are having excessive positive or
negative cash flow, your have a poor short-term financial planning. Again, excessive
positive cash flow is just as bad as excessive negative cash flow. For positive cash flow,
you could better utilized the surplus to get a better living. For negative cash flow, you
need to cut spending and, perhaps, adjust the life style.
Not knowing the full impact of making additional mortgage
principal payments.
Making additional mortgage principal
payments is a very good way of building home equity and shorten the mortgage life. A
consistent small additional principal payment can significantly shorten the life of your
mortgage. Therefore, the amount of addition principal payment needs to be calculated based
on the long-term and short-term financial goals.
Thinking re-finance will pro-long the life of
mortgage.
Re-finance is a way to lower monthly
payment and to offer the option of extending the life of the mortgage. However, majority
of mortgages do not have a "prepayment penalty" and you are free to make
additoinal principal payment to shorten the life of the mortgage with the lowered monthly
payment.
Paying too much fee for mortgages.
Depends on your financial goal, you can
choose the amount of fee you want to pay for a new mortgage. If you pay a larger amount of
fee, you should get a lower rate on your mortgage and you'll need a longer period of time
to recoupe the fees you paid.
Not using the equity in the house.
This is balance of long-term and short-term
financial goals. You can always borrow from the long-term money and use it for the
short-term. Borrowing from your home equity has many advantages including tax benefits and
lower interest rate than most other loans.
Not consolidating 2nd mortgage with earned equity.
If you have a 2nd mortgage and your
property has increased in value, you should consolidate the 2nd mortgage into a new 1st
mortgage.
Not including mortgages in tax planning.
Owning properties still has many tax
benefits. You should consult a tax adviser for the specific details in your situation to
take advantage of these benefits.
Not including mortgage in investment planning.
