Velocity Finance - California Home Loan

California Home Loan - Swinging For The Fences

Lets take a quick look at all the costs associated with your California home loan:

California home prices are simply incredible - average prices for metropolitan areas usually top $500,000, while average household incomes are somewhere around $50, $60k.
Interest rates all across the country are slowly on the rise - and when we're talking this much money a few tenths of a percent increase will make a major difference in monthly payments.
At the same time, home insurance costs for California are continually rising - mud slides, fires, earthquakes.

Put into numbers, an average $500,000 California home loan at a low 6.5% fixed 30 year interest rate will cost you about $3160 a month. Add to that about $100 a month in insurance and you're looking at $3260 a month. To afford your new California home you're gonna have to make an annual income of about $50 - to afford your home and nothing more!

Coping with the California home loan

The upside to your California home loan is that your home is almost guaranteed to keep on appreciating at a respectable rate, at least a rates higher than your interest rates meaning you will always win out in the end. But how do you last? how can you keep going paying over $3200 a month for your home? You get creative, and you bring some additional velocity to your home loans to outpace the demands:

Adjustable rates - taking on an ARM might seem like a silly thing to do with interest rates rising, but remember, the initial rate will last for anywhere between 3 to 10 years, and who knows where rates will be then.
Interest only terms - if you take out the payments toward your home loan principal you'll save yourself hundreds of dollars a month. You'll still gain equity through your California home's appreciation.
Keep an eye on the refinancing market constantly - Eventually your rates will adjust to a higher level, and eventually your interest only terms will come to an end. Unless you're ready to handle the increase in monthly payments, you're gonna have to refinance that loan into something new and affordable.

It is possible keep living in your California home on a relatively small income and still make enough equity to be extremely happy about it. All it takes is a lot of creativity, and the willingness to take a chance with your California home loan.

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