Mortgage Loan Tips
Today there are many different types of mortgages out there available for you to consider. Before you commit yourself to any of them, it is wise to consider what type of situation you are in. How long do you plan on being in the home? What is your overall plan on paying off the mortgage? Is this a home that you would like to keep after you move out, or sell and make a profit? This article will explain a few situations and which mortgage loan may work best for which situation.
Loan Term Loan
If you plan to stay in a home for long term, then you should really consider choosing a fixed mortgage loan. A fixed mortgage loan will carry a fixed mortgage interest rate throughout the life of the loan. These types of loans will typically carry a length of fifteen to thirty years. Some people choose the fifteen year type in order to pay off the loan sooner and own there homes out right quicker. Others will choose the thirty year variety because the payments are a bit cheaper than the fifteen year. If you do choose this type of loan make sure that you are locked into a good interest rate and resist the temptation to refinance when there may be a lower interest rate that you can lock into.
A refinance, often will defeat the purpose of trying to pay off the loan in a short period of time. If you have a chance to refinance, chances are that mortgage companies will try to lock you into another thirty year term and seduce you with a lower interest rate. This is counterproductive so be assured that the loan rate your getting from the start is a good one.
If you have enough income and you plan to stay in the house long term, a fifteen year loan may be right for you. Your payments will be higher and you will pay significantly less mortgage interest over the life of the loan as compared to a thirty year term. If you would like to attempt to pay off your mortgage earlier and save even more mortgage interest you may be interested in the bi-weekly mortgage payment plan or mortgage cycling.
Down Payment
The size of your down payment also has much to do with how much your monthly mortgage note will be. Years ago mortgage companies would offer you about 75% of the value of the property to the homeowner. Today there are many programs out there that will offer you 97%, 100% and even up to 103% of the properties value. Of course the higher the percentage the more your mortgage note will be once you accept the loan. There are positives and negatives to the amount of your down payment.
Usually your mortgage company will charge you what is call private mortgage insurance if you do not put down more than 20% of the loan. This insurance will in a way protect their investment in the property. You must factor this type of mortgage insurance into your monthly payment if you plan to put down less than 20%. If you plan to stay in the house long term and you have the capital, it is a good idea to put down a sizable down payment to avoid the private mortgage insurance.
On the other hand, a 20% downpayment now a days can be a pretty significant lump sum of money. If a property is 100K then you are talking about putting down 20K all at once just to avoid paying monthly for mortgage insurance. If you have good enough credit, today’s lender is willing to lend you a good percentage of the properties value and if you don’t have the 20% to spend as a down payment you should consider taking advantage of this.