Financing your home is no walk in the park, especially when you do not have a lump sum to make an outright purchase. However, this is no big deal because there are other ways to finance a home without paying the whole price of the property upfront. This article highlights four ways by which you can afford your dream home.
There is an old adage that says that “cash is king”. Paying full cash for a property is a feat very few people can pull off. Your ability to do this saves you several months and even years of paying home financiers – you are also free from mortgage fees and appraisal fees. Longer term payment plans sometimes take a psychological toll on homeowners since every payment is a constant reminder that you do not yet fully own your home. Nothing beats the satisfaction of owning your home from an outright purchase. People paying hard cash have an upper-hand in the bidding market over those employing other home finance options. What’s more, it’s much cheaper in the long run compared to other home ownership models.
Mortgages are arguably the most popular home finance option for most people. These home loan providers enter into an agreement with you that allows you to borrow money from them in order to buy a house. With a mortgage, you are required to make an initial deposit on the house and your mortgage financier pays the remainder of the cost on your behalf. You are then required to pay the mortgage lender back in bits over a period of time. You will end up paying more than the house costs since payment comes with interest that adds up over the long period. The maximum debt repayment to mortgage facilities in Ghana should not exceed 40% of your monthly salary according to a directive from the Bank of Ghana.
In this case, you rent a home for a certain amount of time with the option to buy it before the lease expires. Some contracts state that only a percentage of the rent payment goes toward the purchase price. The rent-to-own process is more complicated than just renting and you will need to take extra precautions to protect your interests. Doing so will help you figure out whether the deal is a good choice if you’re looking to buy a home. One disadvantage of the rent-to-own option is that, it can be unclear who is responsible for repairs while you are still renting.
Seller or Owner Financing
Seller or Owner financing is the option where the owner of the property decides to either wholly or partly finance the purchase of the property on behalf of the one buying it. Confused? Let me explain how it works.
Instead of the buyer seeking loans from mortgage lenders to finance the property, they would rather go into an agreement with the seller of the property who may agree to loan them the amount for the buyer to pay up monthly in addition to the interest on the loan. The owner sometimes keeps the title to the house until the buyer pays off the loan.
One advantage of owner financing is that, it is cheaper than what mortgage institutions offer since there are no bank fees or appraisal costs. One disadvantage of this system is that most of such arrangements may include a provision which states that if the borrower is ever late on a single payment, then the borrower loses their entire equity in the house. For example, if you make 24 payments on time and build up GHS 30,000 equity, one late payment will result in you losing all GHS 30,000 of equity. You can negotiate your way out of this type of arrangement but you need to work out the terms before you sign any contracts.
Each option has its benefits and disadvantages depending on the peculiar situation the buyer may find themselves in. It is imperative that people who are looking to buy property weigh their options and make the best decision for themselves.