In this post, I intend to briefly summarize different aspects of the house-buying process based on my experience, with a particular focus on mortgages. I'm mostly summarizing key aspects that I hope will spark your interest in doing additional research.

Mortgages

Amortization means that you will likely be paying an insane amount for your house if you were to wait the full 30 years of a standard mortgage duration. Funny enough, there's not a single way to purchase a property. Some people consider paying off their house a priority. Others don't see any issues with paying the full amount of the house plus interest. Below, I leave a simple mortgage calculator to estimate the total cost of a loan in accordance with the cost of the home, your down payment, interest rate, and loan term. Note that the monthly payment doesn't include escrow (e.g., taxes, insurance) as it's based exclusively on the cost of the house.

Discount points

If you're planning on keeping your mortgage for a long time, or if you have extra money (or seller credits) for the down payment, consider purchasing discount points. These points will reduce the percentage of interest that you pay on the house—a smart move in the long term. Below, I put together a quick calculator that can help you make that decision (TBD).

Snowball payments

Hopefully you'll have some cash sitting around at some point during the duration of your loan. Imagine that at some point you'd like to use some of that to pay toward the principal on your loan. Some lenders don't give you the option of paying, say, $50k toward the principal, as it strongly affects their calculations on their profit for a given loan (among other things). Be careful when choosing a lender and ask whether snowball payments are allowed. Contributing to the principal at once drastically reduces the monthly costs, affects the amortization schedule, and allows you to pay your loan off much faster than expected. Some lenders will allow you to make two or three large payments, and that's still a win. Pro tip: Even an extra $100-200 per month toward principal can save tens of thousands in interest over the life of the loan.

Mortgage recast

Note that snowball payments are generally contributions toward reducing the principal of the loan directly, which subsequently affects the total duration of the loan. However, a snowball payment does not necessarily reduce your monthly payments. If you're interested in paying down a significant amount of your principal, one way (or the only way I know of at the moment) to reduce monthly payments is to recast the loan. Recasting means you're asking the lender to restructure the amortization schedule based on the new principal balance. Note that recasting is NOT equivalent to refinancing. To refinance, the lender writes you a completely new loan! Recasting is done on the same original loan. Pro tip: Not every lender allows you to do this, so asking in advance is sometimes useful.

Rate float-down

For some mortgages, rate float-downs are an option. You generally have to ask if the mortgage you're signing has this as an option. Float-downs allow you to get a lower rate than the one you signed for only if rates go down a given percentage set by the bank. Generally there are one or two float-downs available, but this is highly variable. Note: Float-downs typically cost 0.25-0.5% of the loan amount and may only be available during construction or before closing. From what I know, rate usually needs to drop by at least 0.25-0.5% to qualify.