Finance
Based on the financial obligations of the first year, it would be more expensive to buy the condominium than to rent the house. The first year rent amounts to 9600 dollars. In the context of financial outlay, mortgages are relatively cheaper over a long period than rent. This value is a result of the fact that the mortgage payments do not continue to perpetuity. The present value of the mortgage is subsequently lower than that of the rent. However, in the short run, the rent presents the lower cost. In this respect, renting the property would be a viable option. Additional costs incurred to the tune of 1340 dollars, do not present any cost implication above that of the mortgage. The initial outlay of the mortgage has made the option more costly than the rent option.
It is possible to recommend the mortgage to Maria. The mortgage is more expensive than rent in the initial costs but has a higher return value. The present value of the mortgage net of the salvage value of the mortgaged property is a very low figure. The rent does not have an option for transferring the title of property. The net present value of the rent gives the cost implication of the rent to perpetuity. This figure is significantly larger than the cost of the mortgage option. In the interest of saving costs and securing property in the end, mortgage is a better option than renting. The primary distinction between the mortgage option and the rent option is the fact that mortgage transfers the title of the property to the person who takes that option. In case she intends to keep the property, or she intends to dwell in it for more than fifteen years, mortgage is a better option than renting.
Private mortgage insurance
The private mortgage insurance payment is money that lenders require the borrowers to pay in case the borrower does not have sufficient title to the property. The payment is beneficial because it reduces the amount of down payment that a person has to shore up for initial down payment. The requirement for a down payment without mortgage insurance is 20%. The buyer may avoid paying mortgage insurance in cases where one can shore up 20% of the value of the property. Mortgage insurance lessens the burden of down payment on the buyer and ensures the lender of recouping the money of the borrower defaults. If one can shore up the requisite 20% down payment for the mortgage, then private mortgage is not a requirement.
Other costs
Good faith estimate
Closing costs tend to vary; they are highly dependent on the property being acquired. The cost of the property under consideration also comes into play. Federal laws require a lender to provide the mortgagor with a good faith estimate. The amount represents a precise estimate of the fees payable by the buyer in association with the property.
Origination fees
The buyer charges the origination fees to the borrower. These costs include points; payment made in order to acquire a favorable interest rate, the other component of these costs is the processing fee in light of the bank charges. Tax charges, wire charges, and costs involved in preparation of requisite documents fall under this category, as well. These rates vary widely depending on the bank that handles the mortgage.
Third party fees
The third party fees include charges for legal services, inspection of property, surveyor’s fees, insurance for the homeowner and title search charges. Some of the expenses can be fixed across the industry but getting the best offer is always advisable.
Seller/lender assistance
The buyer may request the seller to foot some of the closing costs in order to get favorable terms from the mortgage provider. This happens when the lending institution does not allow the lender to roll in the closing costs on the mortgage. Some lenders may be willing to pay some of the closing costs. The lenders may not be willing to pay the amount. Getting a fair lender would solve the problem.
Payment
It is possible to afford a house at the given rate in the country. The average closing costs on property worth 200000 dollars is 4000 dollars as of 2011. This represents a considerable value for money because the bracket encompasses people who would not be able, otherwise, to afford the housing. The ability to pay for closing costs, and marshal the 20% outlay that enables one to avoid paying private mortgage interest, could be out of the question. In this case, paying private mortgage interest may be an eventuality that is hard to circumvent. Nonetheless, it is possible to own a hoe at the prevailing rates. It is certainly cheaper than renting in the end.
Refinancing
In the mortgage refinancing options, a person can decide to take an additional loan to pay out the ini9tial mortgage. This enables the lender to enjoy lower interest rates than the original mortgage. Some refinancing options may come with appended costs that make them as expensive as the original plan, even with the reduced rates. Some refinancing options could enable the borrower to convert the mortgage from, say, a 15-year term to a 30-year term. Some of the refinancing options enable the borrower to convert the option from a variable interest rate model to a fixed rate of interest arrangement.
