3 Important Factors for Choosing a Mortgage
When buying your first home, choosing a mortgage can seem very overwhelming. Here is some basic terminology that you should know in order to make an informed decision.
- Term - The length you have to pay off a mortgage is called the term. Mortgage terms range between 10 years and 30 years. A mortgage is like any loan, the longer the term, the lower your monthly payments will be. However, an important mortgage tip to note - in many cases, a shorter-term mortgage will result in a lower interest rate.
- Rate - The "rate" is the interest rate, which is the amount you are charged by the lender to borrow money from them. Interest rates are determined based on your credit rating, the amount of your down payment, the amount of money you make and the value of your home.
- Cost - When dealing with mortgages, costs typically refer to closing costs. Just about every mortgage has closing costs associated with it, and if you get a no closing cost loan, it means the mortgage company is making a commission on your loan that is large enough to cover the closing costs for you. Closing costs include an appraisal, recording fees, deeds, and attorney or notary fees. Be on the look out for junk fees!
Choosing a Mortgage Term
The mortgage term is an important factor to take into consideration when selecting your mortgage program. The longer the term, the lower your monthly payments - but having the lowest possible payments is not on every person's mind. Many people prefer to make larger payments on their mortgage because it is paid faster and because they are investing in an appreciating asset. In addition, if you have plans to rent your property or a unit within your property, you will earn more money if you pay your mortgage faster. If you can afford them, larger payments are better for a home loan. If you cannot afford higher payments all the time, you can get the same results with a 30 year fixed mortgage by making an additional payment once or twice throughout the year.
Mortgage Broker Advantages
Finding the perfect home might appear to be the difficult part of the home buying process, but it's actually getting financing for that perfect home that is harder! Part of the difficulty comes from having so many options for mortgage loans and so many mortgage lenders from which to get them. In order to make sense of all of the options, a mortgage broker is your best bet. They will describe the terms of loans, interest rates, and estimated monthly payments. It is best to talk to a mortgage broker before you decide on the home you want to buy, in order to be sure you are looking at homes that are really in your price range. Then, take the information you gain from seeing a mortgage broker online and do some comparing. There are many mortgage web sites that are part of large lending partnerships, and you can often find a better interest rate or better loan terms than your local mortgage broker. You have to go with the best option for your financial future.
Adjustable Rate Mortgages – Risky or Rewarding?
What is the reason people get an adjustable rate mortgage loan? An adjustable rate mortgage (ARM) is the best option for some people, particularly people who only plan to live in their home for a few years before selling it. ARM's work by setting an interest rate for a short term, maybe your first month or your first year or two- and then it changes. Adjustable rate mortgages are also helpful for people who want to get into their dream home with a lower monthly payment in the beginning. For instance, if you have reason to believe your income is going to increase significantly in a few years and you will be able to afford more then, maybe an ARM is the best choice for you. Following the market is a good idea if you have an adjustable rate mortgage- you will want to watch and select the best time to refinance your loan into a fixed rate mortgage when the rates are at their lowest.
START HERE: Prepaying Your Mortgage Loan
A thirty-year mortgage term, when you first buy a home can seem like a long time to pay for a home. There are many things you can consider, that will aide in significantly shortening the term of your mortgage without the need to refinance.
- A very helpful way to reduce the term of your mortgage is to send a few extra dollars in with your payment each month. The payment no matter how small or large will be applied to the principal of the mortgage instead of the interest. You can usually add a dollar amount that specifically goes towards that and even if you can only afford $20.00, send it in. That is an extra $240.00 towards your principle each year.
- Take an extra step and make an extra full payment each year, by doing this you will reduce the length of your mortgage greatly.
- It is wise to invest extra money back into your home, thus increasing the value of your home. Taking extra money that might otherwise be spent on something useless and putting it back into your home can help you in the end.
Penalties on Prepaying an Adjustable Rate Mortgage
When you are choosing a mortgage for home, carefully investigate the criteria set forth on the subject of prepayments. If you choose later to refinance your home, it is possible that you will suffer a penalty for prepaying Penalties for prepayment generally come with loans that are high risk and carry high interest rates. Prepayment penalties are assessed when you make the decision to pay the mortgage off before the term ends. The mortgage company will penalize you with a predetermined amount of money as a penalty for prepayment. The penalty may be a general amount fixed by the company or a certain percentage of the amount of your loan. It is wise to seek a mortgage that does not penalize you for prepayment. Doing so can save you literally thousands of dollars in the future.
Reverse Mortgage Funding
As we grow older, living expenses seem to increase drastically, it is for this reason a great number of elders choose to seek a reverse mortgage to provide help with these expenses. This option typically works well for those who have fully paid for their home, and have no mortgage upon it. Simply speaking, when you take advantage of a reverse mortgage you will receive a monthly stipend from the equity that your home carries. This is especially useful to the elderly, sometimes securing a reverse mortgage aides them with living expenses, that alone could help in allowing them to remain within their own home. It is wise to request to a mortgage broker that the cost of closing should be paid out of the money received from the reverse mortgage loan. Essentially meaning, no expenses directly out of pocket.
Mortgage Options – Interest Only
Interest only mortgages are specifically designed to substantially decrease your payment amount over the first years of the mortgage term. The way this program works is that for these first few years you are only making payments towards the interest of the mortgage. This keeps the mortgage payments lower than other mortgage options because you are not required to pay on the principal of the loan. Eventually the time will come that you will be required to pay both the interest and the principal. It is wise to fully investigate this mortgage option prior to choosing it. Very carefully make some calculations and determine rather or not you will be able to afford the payments once both interest and principal are required.
The Right Mortgage Broker for you.
With the vast presence of the internet, obtaining the proper mortgage broker has never been easier. Additionally the internet allows you to locate mortgage brokers from all over your area. You are not limited to using a local broker or company in any way. The mortgage brokers you can find on the internet are in great competition with each other. What does this mean for you? It is simple because they are so competitive, you will win with excellent program and competitive rates. To choose the proper mortgage broker for you, you first must be comfortable in choosing them. Choose a mortgage broker that gives you confidence in their guidance. Take your time in finding the perfect mortgage broker for you; make sure their goals and your goals match, thoroughly research all your options before making a choice.
Obtaining a Mortgage Loan the Fast way.
Obtaining a mortgage loan through the internet is easier than ever before. The benefit of an online mortgage broker is that generally, they have a wider spectrum of lenders and various programs that a typical mortgage broker might have. More often than not, they have the ability to process request more quickly, as well. Online mortgage brokers can even aid you if there is urgency because of a fast approaching closing date or you are in need of speedy refinancing. All of this is thanks to the technology of automated credit checks, verification of income and online loan applications. You can find mortgage brokers through various measures such as using a popular search engine like Google, simply type in mortgage broker and you will be amazed with the results. A better option is to search for reviews about the mortgage broker or seek the advice and referrals from your friends and family. The best mortgage broker will possess the seal of the Better Business Bureau.
Adjustable Rate Mortgage and What you should know about it.
If you opt for an adjustable rate mortgage ensure that you are fully aware of these facts , this will help you be ready when the time comes for your fixed rate mortgage ceases.
- You should know when the first rate adjustment will occur and how much the adjustment will be. Knowing the specific date will prepare you for the event.
- You should know that the adjustable mortgage rate fluctuates with the changes of interest rates. Find out what index your rate is associated with, so you can investigate the interest rates on your own.
- Know all of your options when it comes to refinancing. If a adjustable rate mortgage proves to be unbeneficial for you, you have the option of refinancing with a fixed rate mortgage. To get a good interest rate on a fixed mortgage you should watch the rates closely and if you choose to refinance, do so when the rates are comfortable to you.
Obtaining Flexible Interest Only Mortgages
For those that practice self-discipline, a flexible interest only may be practical. This option provides a payment arrangement that is flexible in regards to the payments that you make. This does not mean they are flexible on the timely manner in which you pay them, this simply means when your payment date arrives you are required to make a minimum payment of at least an amount towards the interest on the loan. However, with this flexible option you can opt to pay an additional amount towards the principle of your mortgage. Generally, your flexible interest only coupon book will include an area that determines the amount needed to be applied towards the principle if you should choose to do so. This is where that self-discipline comes in handy, it is wise to apply as much as possible towards the principle, bringing the amount down and coming that much closer to paying off your mortgage.