Are you planning on financing a home purchase? Do you need to know which mortgage will be the most suitable for you? If you answered yes to this question there are some important factors that should be considered beforehand.
It can be monthly payment, time period and the interest rate that you get on your loan. There are four key methods of financing the mortgage for your house.
You can make your choice from a 30-year fixed rate, 15-year fixed rate, adjustable rate, and interest only plans. Each of these mortgages financing opportunities have their pros and cons. A lender or mortgage broker can assist you with finding the right loan for your situation.
One of the most popular mortgages for homebuyers is 30-year fixed rate also know as 30-year loan. The interest rate is fixed which means that the rate of interest does not go up or down according to the changes in the market. Since the interest does not vary, the payments stay fixed as well. You may have to pay more in property taxes as the taxes can increase, or as the home increases in value.
The majority of buyers opt for this long term financing choice since the monthly payments are generally lower than they would be with a shorter term loan. The major downfall with this type of mortgage is that the interest rate is time and again a little higher as compared to a 15-year loan which results in more money paid with the interest over the life of the loan and the house will gain equity at a slower rate. In case the interest rates fall down, the rate of the loan does not adjust, but it is generally possible to refinance to the lower rate of interest.
Payment of the mortgage are determined according to the following criteria which includes amount of the loan, length of the loan, down payment, discount points, closing costs, Credit quality, Income level total time span. Have a look on the few factors that would affect mortgage.
Loan Amount: The amount of the borrowed loan can increase due to the interest rate if you are unable to make payment on time and exceeds the conforming loan limits set by the company. The assured loan limit modifies at the starting of each year. Loan plans such as a 30 year loan can help you in saving thousands of dollars in interest payments over the life of the mortgage; however your monthly payments will be high. An adjustable rate mortgage may allow you to start with a lower interest rate as compared to a fixed rate mortgage, but your expenses could get higher as the rates of interest changes.
Down Payment: A large amount on the down payment will bring you the best possible interest charges. If you have the cash now and wish to lower your payments, you can disperse points on your advance to lower your mortgage fee. The model is straightforward: In exchange for more money down, lenders are ready to lower their rates of interest, cutting down the borrower"s fees. Keep in mind that other expenses such as closing costs need to be factored in to your down payment decision.
Closing costs: besides the down payment, you will be required to pay closing costs for your loan and moving the ownership of the property from the vendor to yourself. The closing costs can range anywhere from 3% to 5% of your loan amount, as per your location and the loan amount you select and your closing date.