Rent Vs Mortgage – Similarities And Differences

Rent is the payment one makes to live in a house or apartment for a specified period of time. Rent payments are mostly done monthly. On the other hand, mortgage payment gives you the ability to live in a house or apartment and at the same time allows you to have ownership of the house once the mortgage payments are completed. A mortgage is like a loan used to purchase a home.Below, are the similarities and differences between rent and mortgages.

Similarities between a Rent and Mortgage

Monthly Payments

The most obvious similarity is that they both give you the rights to live exclusively in the house you are paying for and the payments are done monthly. You also have the right to allow other people to live with you in the same house for both options as long as the house is being paid for. Another similar thing to note is that the payment you make monthly reflects the value of the residence or home. The cost of rent and mortgage are going to be fairly steady. They are not likely to jump up very high or plummet a huge amount either. Tenants pay monthly rent to the landlord to get the benefit of residing in the apartment while homeowners pay a monthly mortgage payment to the lender of the loan so as to pay it off.

Contracts

Whether you choose to buy a house using mortgage or buy one, a contract is usually signed by a third party. For the case of renting, you have to sign a lease that outlines the rules for living in the property, usage of the property and an agreement of how either party should communicate in case either wants to terminate the contract. For mortgage payments, there is a deed of trust that outlines how the loan will be paid back, homeowners insurance requirements, escrow payments and what will happen if you default on the loan. Both rent and mortgage payments are legally binding and if you fail to abide by the terms of the contract you can face eviction from the property and in extreme cases monetary compensation.

Differences between Rent and Mortgages

Control over the House

One major difference is that with a mortgage is you will have more control over the property that someone who is renting the house. You can choose to paint the house with the color of your choice or make any home improvements while with a rental you will have to live in the house as it is and there are some restrictions like no having pets in the compound.

Payment Fluctuations

Another difference is that the mortgage cost can go up and down depending on the prevailing market rates and the economy and also on the individual interest rates. The fluctuation will be by a few dollars over the course of the year whereas your rent is likely to remain the same for a long period.

Tax Benefits of having a Mortgage

Many people are unaware of the tax benefits of having a mortgage. Interest payments which are included in mortgages are the cost of financing the home. In the initial years of the mortgage term, a huge amount of the monthly payment goes towards paying off the interest owned on loan. A small percentage goes to reducing the principal amount. Your taxable income can be reduced by writing off mortgage interest payments. You will either get a bigger tax refund or your tax payable will be less. With rent payments, there is no option for this deduction.You could end up paying more taxes with the rent option than if you had chosen the mortgage option.

A List Of Documents You Will Need For Pre-Approval Options

Finding a lender that will provide you with a home loan is only part of the process. You need to have all of your paperwork in order. You need to have documents that will be necessary to go through the approval process, documents that will be requested. By having all of these ready to go, it will accelerate the process by which lenders can make a decision. Whether you are contacting individual lenders or working with a mortgage broker, all of this information still needs to be provided. Here is a quick list of the documents that you will need if you are looking at preapproval options offered by lenders nationwide.

Why Having These Documents Ready Is So Important

One of the main reasons that people are not able to purchase a home that is currently on the market is not the lending and approval process does not go smoothly. They might bring in some of the documents that are necessary, but by making the potential lender request additional information, you could be delaying your approval for several weeks. Speed is of the essence in the real estate industry, and these are the documents that you need to have ready.

Documents That You Will Need

Some of the documents that you will need will include but are not limited to, your Social Security card. You need to show proof of employment which can be a copy of a check that you received from your employer. Proof of income will also be on this check, and they will also request bank statements to show that you are getting regular deposits. Tax documents are also necessary. This will give them an overview of how much money you do make, allowing them to come to a decision. If you currently rent or own, they need to know where this is. This may influence their decision significantly. For example, if you own a home, they can see how much the home is valued at by doing comps of similar properties in the area, plus they can find out how much equity you have in that home. Finally, you need to have your credit information ready. This may not be necessary because all of them are going to do a credit check. Last but not least, you should have a purchase agreement signs and ready to go in case the approval goes through.

Why Is All Of This Paperwork Necessary?

The reason that this paperwork is necessary is that all lenders will require this information to verify your financial situation. In the world of lending, they are only concerned with a couple of things which will include your credit score, whether or not you are employed, and how much debt you have. If you do not have all of this information, it can make it very difficult for you to apply for and receive a loan. By having all of this ready, you can ensure that the loan process will go through as quickly as possible, something that may be very necessary if you are trying to get a home currently on the market.

Although it was once possible to get what were called no doc or low doc loans in the past, these are not available today in most cases. The banking fiasco from years ago was the result of many people getting loans for substantial amounts of money, loans that they simply could not make the payments on. Although this was typically based on home loans with flexible interest rates, they still need to know that you are fully capable of making these payments. If you can do this, you will soon have the ability to get a home loan because you are providing all of the necessary documentation.

A Step-By-Step Guide When Working With Preapproved Loan Offers

If you have recently received a preapproved offer for a home loan in the mail, you might wonder what this means. Many of us have gone to the website provided in the letter, only to be denied. There is a misconception that preapproved offers mean that you have been approved for a loan without a credit check. This is simply a way of sending notices to people that might be looking for a home loan, or a refinance loan, that might be good candidates. To improve your chances of becoming a first-time homeowner, or obtaining that home equity loan that you are looking for, the following tips will make it easier for you to accomplish.

How To Get Started With These Companies

Whether you get this type of notification in the mail, or if you have been looking online, there are things that you need to have in order before you start this process. First of all, you should have a general idea of what your credit score is before you start to apply for these loans. Second, you need to move forward, filling out the application, but only with companies that you have fully vetted. You need to do research on each company, look for perhaps testimonials from customers that use their services before, and find out what has happened. Once you have a shortlist of attentional lenders that look promising, you will then want to submit your information.

How Long Will It Take To Get A Response?

The response that you receive might take as long as a day or two. Sometimes you will hear shortly after hitting the submit button online. They will do a credit check immediately, and based upon the parameters that they are working with; they will either approve you or deny you. Typically, when you get a notification that it’s going to take them a little bit longer to evaluate your application, this simply means that you have been denied. However, one or two of them will likely have excellent rates and will have a high percentage of people that apply and receive this money, making it possible for you also to get the loan that you need.

How Do You Find These Evaluations?

Some businesses will evaluate different lenders that provide the opportunity for obtaining preapproved loans. There is also the possibility that you may go to mortgage brokers, and they can tell you which ones will be the easiest for you to work with. They more than likely process thousands of these every year, and they know which ones are more flexible. If you are in a situation where your credit score is not that high, but you do have the ability to make your payments, these are the ones that they will submit your information to so that you will have the best chance of getting the loan.

This simple step-by-step plan of action will help you get your loan as fast as possible. Do your research on each of the preapproved lenders that have sent you information, or the ones that you find on the web. If working with mortgage brokers, they can tell you which ones will be the easiest to work with. Finally, once your information is submitted, and if you are approved, you simply need to complete the paperwork that is provided to get access to this loan. It is that easy to work with these companies that have preapproved loan offers. As long as you do your research to verify their authenticity, and submit your information immediately, you should be able to get your loan from these lenders.