Home Companies Mortgage Refinancing – Tips For Mortgage Debt Reduction And Increase In Your Housing Ratio

Mortgage Refinancing – Tips For Mortgage Debt Reduction And Increase In Your Housing Ratio

by gbaf mag

Housing Ratio or the percentage of mortgage debt to income is one of the most important ratios in mortgage loans. Thus it greatly affects your credit rating. To know what is the housing ratio, you can get free mortgage loan quotes from the lenders for sale in your locality. It provides an idea about how much debt is required for paying the property taxes and insurance. The value of the house may also change with changing housing ratios.

Mortgage Insurance or the property taxes are based on current market values of houses and their resale value. Therefore if the value of the property is more than the mortgage insurance, then you may have to pay a higher premium for the mortgage insurance. Housing ratio tells about the amount of monthly debt payments required for owning a property. It also reflects the percentage of borrowers monthly income that is dedicated to mortgage payments. If the borrower earns less income, the lender tends to fall back on the security (foreclosure procedure). Thus the overall housing ratio takes into account all these factors.

Usually, a monthly mortgage liability takes care of the cost of buying the property. If the borrower makes a good repayment, he may increase his gross monthly income and reduce his housing ratio that way. But with growing debt, the homeowners often fall into the trap of unaffordable monthly mortgage obligations and end up losing the home.

Hence there are many financial planners who recommend people to control their housing ratio. They reduce their monthly mortgage obligations by increasing their income. In other words, if the gross monthly income of the borrower is higher than his monthly debt payment, he pays fewer mortgages. On the other hand, if the borrower makes a bad repayment, then he becomes over-burdened and his housing ratio is harmed adversely. Thus, the first tip in saving your home is to control your housing ratio.

The first step is to check your income and debt to determine whether you are comfortably able to pay your installments monthly. You can do so through free online income calculators. Thereafter, divide your gross monthly income by your monthly debt load and get the ratio. This will help you decide whether you need to cut down on your expenditure. Now, if you find that your income is still comfortable, you need not worry about your housing ratio. Just increase it instead of reducing it.

Secondly, homeowners tend to increase their expenditure to meet their monthly housing expenses. This increases the cost of living and consequently the housing ratios of lenders use various techniques to bring down the overall costs. Some lenders use the FICO score to analyze the borrowers. They check whether the borrower has maintained a good credit history in the past. If not, they consider him as high risk and will charge high interest.

The third tip to save your home from foreclosure is to make timely payments. If the mortgage lender finds that you delay your payments, he may be forced to repossess your property. Hence, prompt repayment is important for lowering your housing ratio.

Once your housing ratio is brought down by a reasonable percentage, you can easily qualify for the loan with better terms and interest rate. This means you will get a better deal in the long run. On top of that, you will also have the opportunity of enjoying more flexible mortgage obligations. These are just some of the many advantages that you get when you lower your monthly debt obligations.


You may also like