Your fixed rate mortgage Information
If you are planning to buy a new home one of the most important aspects of the process is getting your mortgage. A mortgage is a loan that will stay with you for decades so it is important to get the best possible deal so that you can save yourself as much money as possible.
The first part of getting your mortgage is to understand the difference between a fixed rate and a variable rate mortgage. A fixed rate mortgage means that your interest will remain constant over the life of the loan and your monthly mortgage payment will also remain the same. A variable rate mortgage will change depending on the current interest rates. You will usually get a low interest rate for a fixed period of time and the interest rate will then be adjusted on a yearly basis according to current market conditions.
When interest rates are low and you are planning to stay in your home for a long period of time, it is a good idea to get a fixed rate mortgage. If interest rates are high or you are planning to stay in your home a short period of time you may want to consider a variable rate mortgage. No matter what type of mortgage you are planning the most important thing you can do is lock in you mortgage rate.
Locking your mortgage rate guarantees you will receive the interest rate you locked even if the mortgage rates increase. When you lock your mortgage rate make sure to get it in writing so there is no confusion later on. If the lender won’t put it on paper you should find a new lender.
When you lock your interest rate it will usually last one or two months. In some cases you can pay to have the locked interest rate for a longer period of time. You can think of it as taking out insurance on your mortgage rate.
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Article author: Sebastian Palmer
“MORTGAGE LOAN TYPES”
Mortgage loan means that borrowing the money from the loan lender by using property. Many types of mortgage loans available for the borrower. Borrower can choose the type of mortgage loan that suits his or her needs. Borrower can choose fixed rate mortgage or Adjustable rate loans as per requirement. Types of mortgage loan are:
Fixed rate mortgages loan
Adjustable rate mortgages loan
Jumbo loans
Balloon loans
Fixed rate mortgages loan:
Fixed rate mortgages loan is the best mortgage loan. In this the rate of interest is fixed for whole loan period. This loan is suitable for the person who is going to stay in a same house for a long period. If the
borrower want to shift the house within 7 year then they can use the adjustable rate mortgage loans. Normally loan period is 10,15,20,25,30 and 40 year but 30-year fixed rate mortgage is famous because it offers the smallest monthly payments of fixed rate loans while providing for a never-changing schedule. Another type of this loan is 20-year mortgage loan. In this, loan period is 20 years and interest rate will be lesser than 30-year mortgage loans. In 15 years loan, interest rate will be less as compared to 30 and 20-year mortgage loan.
Adjustable rate mortgages loan:
Adjustable rate mortgage loan is suitable for the person who always shifts the home and the person who is looking for low interest rate. This loan offers the lowest initial rates by sharing the risk of higher loan rates between borrower and lender in future. In this the interest rate will be fixed for first three, five and seven year but after that the interest rate will vary every 12 months. The interest rate will vary from 0.5 to 2 percent. As the interest rate is less many peoples prefer the adjustable rate mortgage loans.
Jumbo loans:
Jumbo loans are preferred when a person want a large loan amount more than $ 1 million. Down payment for this loan will be 5%. To purchase a expensive home jumbo loans are needed. Jumbo loans is also known as non conforming loans. When a loan amount is larger than the conforming limit then it becomes a Jumbo Loan or non-conforming loan with slightly higher interest rates. Jumbo Loans can be combined with historically low mortgage rates so that they provide greater flexibility to some home buyers to purchase the home they want. Interest rates is low so consumer interest in Jumbo Loans is very high.
Balloon loans:
These loans are the short-term mortgage loans which is similar to a fixed rate mortgage loan. The difference is that balloon loans provide a level payment feature during the loan term. They have maturities of usually 5 - 7 years. The balloon mortgage with this option is popularly known as 7/23 or 5/25 convertible.
Article author: sahil dhingra
If you’re unable to make payments for your existing mortgage loan or find that the interest rate in the market has fallen than the rate you are paying on your current mortgage, you can
opt for refinancing. You may get a new loan of the same amount, keeping your same property as collateral.
Why should you opt for refinancing?
People opt to get refinance on their mortgage for several reasons. You may opt for refinancing, for any one of the following situations:
If you have an adjustable-rate mortgage and you want to convert to fixed rate mortgage
If you want to convert your short term loan to long term, as you want to reduce your monthly payments
If you want to change your current high interest rate mortgage to a lower interest rate mortgage
If you have more than one mortgage and want to consolidate them into a single new loan
If you have a longer loan term and want it to convert to a shorter loan term, so that you can pay off your loan faster and build equity
If you want to get an adjustable-rate mortgage with better terms
If you want some cash to pay off other multiple debts or to purchase something
What are the types of refinancing?
Once you make up your mind to refinance your mortgage, you can opt for any type, according to your suitability. The 4 main types of refinancing are:
1.Low fixed rate loan: If you have a fixed rate mortgage with very high interest rate and find that the interest rate in the market has dropped, you may go for this type. You can also go for this type if you have an adjustable-rate mortgage. It is better to go for a fixed rate mortgage with lower interest rate, than to have an adjustable-rate mortgage, because, interest rate in adjustable-rate mortgage can become higher at any time.
2.Short term loan: You can opt for a shorter loan term if you want to pay off your loan quickly and build up equity. In this type of refinance, your monthly repayment amount will be higher, but, you will be able to pay off your mortgage at a less time. You will also get tax deduction on the interest.
3.Longer term loan: If you cannot afford to your current high monthly payment amount, you can opt to refinance your mortgage to get a loan with longer term and lower interest rate.
4.Cash-out refinancing: You can opt for this type if you want to take a higher amount of loan than your current mortgage and convert the difference as home equity into cash.
You can opt for any type refinancing plan, based on your affordability and choose the type that suits you the best.
Article author: Belinda Dawson
