2byFour.com I Buy Houses, Land, Apartments, Self Storage I Buy Houses * Land *Apartment Properties * Self-Storage Complexes

How To Separate The Good From The Bad Mortgages

Before you start looking for your home do a little research for the mortgage you will apply for. Obtaining a favorable mortgage will affect your finances for years to come. Most people owning homes learn it is their largest investment. You should protect this investment by obtaining a low interest rate mortgage. Other factors affecting the cost of the mortgage are pre-payment penalties, points, mortgage insurance premiums, sales commissions and overcharges for legal and other origination fees. Here are some tips to help make the decisions easier.
Finding the right mortgage takes some research. There are different types of mortgages such as VA, FHA RHS and conventional financing. Qualifying for these different types of financing does require asking questions. Finding the answers will help find the right loan for your house purchase.

There are many mortgage types and these guidelines will help. First, mortgages can be government or conventional. Each category has differing down payment requirements. You may find a three percent down payment for an FHA loan but a one half percent mortgage insurance premium is included in the loan amount. Veterans may be eligible for a no down payment government guaranteed loan. Conventional loans are widely available and vary in terms and mortgage insurance requirements.

The first question you must find an answer for is "How much mortgage payment can I afford"? Arriving at this amount is determined by the interest rate, length of time the mortgage is for and other fees charged for the origination of the mortgage.

Refinance Mortgage Rate Calculator

Refinancing is a smart move if you want to lower your monthly payment and overall interest bill. With refinance mortgages, you are also able to change the term of the loan to a shorter one so you can pay off the loan earlier and save more on interest.

There are actually several reasons why people want to take a refinance mortgage. This is also why refinance mortgage rate calculators are important. Refinance mortgage rate calculators help consumers determine the amount of savings they can make on their chosen loan type. Refinance mortgage rate calculators also aid you in finding out how much is your monthly payment for your refinancing loan.

The Internet refinance mortgage rate calculators show you the monthly payments you need to make for your mortgage. Aside from that, these refinance mortgage rate calculators also show you the total interest rate. If you're more concerned on how much saving you will be able to make with a refinancing loan, refinance mortgage rate calculators will also help you on that.

The refinance mortgage rate calculator will ask you for your current loan information. For instance, on the refinance mortgage rate calculator, a field labeled Principal Balance will be provided along with the Monthly Payment and Annual Interest Rate fields. You need fill these up in order to start using the refinance mortgage rate calculator.

To complete the process, the website's refinance mortgage rate calculator will also ask for your new loan information. Another three fields will be provided in the refinance mortgage rate calculator. The refinance mortgage rate calculator fields are: Annual Interest Rate, Term, and closing Costs. By checking on the Finance Closing Costs at the bottom part of the refinance mortgage rate calculator and then hitting the Calculate button, you can determine how many months it will take for your loan to break even on the closing costs.

For example, for the Principal Balance field on the refinance mortgage rate calculator, you put in $150,000 (Take note that the amount you place in this refinance mortgage rate calculator field represents the remaining pay-off balance). The Interest Rate of your current loan is 6% and the data you put in the refinance mortgage rate calculator Monthly Payment field is $899.30.

For the New Loan Information portion of the refinance mortgage rate calculator, you place the following data: 5% Annual Interest Rate, 30-year Term, and $0 for Closing Costs. Make sure that you check the box for Finance Closing Costs at the bottom of the refinance mortgage calculator before hitting the Calculate button.

The results of the refinance mortgage rate calculator would show you that your new monthly payment would be $805.23, $93.77 short of your current loan monthly payment. The refinance mortgage rate calculator would also display the difference in the interest rates of both loans. With the refinance mortgage rate calculator, you will be able to find that the total interest of your current loan would be $173,757.28 while your new interest after refinancing would be $139,883.68. This allows you to save $33,873.61 on interest.

Interest-only Mortgage

There are only two things people should keep in mind before taking on an interest-only mortgage. The name interest-only mortgage is misleading. If truth be told, there is no such thing as an interest-only mortgage. In an interest-only mortgage, you will still have to pay for the loan principal. When you get an interest-only mortgage, what you're really getting is an interest-only payment method which you can combine with other traditional mortgage types.

The other thing you need to keep in mind is that the stated benefits of interest-only mortgages are exaggerated. In a standard mortgage, 95% if each dollar paid to the lender goes to the loan interest. Thus on a $100,000 standard loan with 6% interest, the total payment would be $600 with the $500 going to interest and the other $100 for equity.

A Brief History of Interest-Only Mortgages

Interest-only mortgages are not relatively new concepts. The idea behind interest-only mortgages was spawned from the more flexible and more inventive jumbo mortgage markets. Because of this, interest-only mortgages are traditionally a loan type preferred by savvy investors and well-heeled clients who want to use the principal portion of their payment on other more productive investments.

Because interest-only mortgages are jumbo loans, the difference in monthly payment grows with the larger loan amount. For example, in a $100,000 interest-only mortgage loan, the per month difference is $100. If the loan is worth $1,000,000, then the difference per month grows to $1,000, a substantial amount that can be put to better use. The savvy investor can make it so that his investment using the money he gets from the per month difference growth of an interest-only mortgage can increase within a short period, thus leveraging incomes to build assets.

This is partly the reason why interest-only mortgages are still preferred by big-time investors. However, it is only natural to assume that there are some considerable risks associated with an interest-only mortgage, especially when it comes to stocks.

Interest-only mortgages have payment periods based on adjustable rate mortgages. This however is not always the case. Interest-only mortgage payment schedules are also offered in fixed rate mortgages as well. Interest-only mortgages have also gone mainstream so virtually anyone can borrow money with this type of loan.

Temporary Payment Periods

The payment periods for interest-only mortgages almost never run for the entire term of the loan. Even with a fixed rate mortgage, interest-only mortgages are still bound to be only temporary. And Interest First product only lets interest-only mortgage payments for half of the total term.

The expiration schedule of an interest-only mortgage payment is usually at the end of a set period. This makes interest-only mortgages compatible to "amalgam" adjustable rate mortgages. When the interest-only mortgage payment comes to an end your payment will then rise to include principal and interest.

The great thing about interest-only mortgages

Interest-only mortgage payments also have their advantages. Borrowers can find that there are various practical benefits that an interest-only mortgage can offer. First is that, interest-only mortgages can help you in accumulating assets. Because interest-only mortgages do not demand so much during its initial years, you can use the payment differential in a cash investment. The spare cash provided by interest-only mortgages may also be used for college money, retirement money, and even as a seasonal income factor.

Of course, you are the only person who can really tell if the mortgage option is right for you or not. However, awareness of the issues that surround those choices is a good way to make a more informed decision.

Fixed Rate Mortgage

There are several types of mortgages offered by lenders in the market. The most common of these types is fixed rate mortgages. Fixed rate mortgage loans are characterized by fixed rates and monthly payments that are generally for a 15-year and 30-year periods.

Fixed rate mortgages are popular in the consumer market because of its stability. Most consumers are hesitant to get house loans where the rates fluctuate with the changing interest rates of the market. Fixed rate mortgages are generally very affordable, especially when rates are low.

Consumers of fixed rate mortgages are faced with having to choose between a 15-year fixed rate mortgage or a 30-year fixed rate mortgage. Some prefer 15-year fixed rate mortgages because of the shorter duration. Other consumers choose 30-year fixed rate mortgages because the payments are considerably lower than the former.

Each type of fixed rate mortgages certainly has its own advantages and disadvantages. Here are some of them.

30-year Fixed Rate Mortgage; Advantages and Disadvantages

A 30-year fixed rate mortgage gives consumers the opportunity to borrow money on a long-term basis. They do this without having to worry about the change that might occur in fixed rate mortgage interest rates or payments of such.

Because the interest of a 30-year fixed rate mortgage is amortized over a longer period, the monthly payments for this are lower than those on 15-year loans. Lower monthly payments on 30-year fixed rate mortgages give consumers an extra resource which they can pour into other worthy investments.

On the other hand, this could also cause a slight disadvantage for 30-year fixed rate mortgage borrowers. The overall interest bill of a 30-year fixed rate mortgage is much higher because of the long amortization period. And because payments for 30-day fixed rate mortgages are usually used to pay up the interest rather than the principal at first, borrowers will be building up their equity at a slower pace.

The high interest rates of 30-day fixed rate mortgage loans do not necessarily stop consumers from taking this type of loan. They reason that higher interest bill for 30-day fixed rate mortgages increases the amount they can deduct at tax time. This could potentially reduce or perhaps, even eliminate their federal income tax liability.

15-year Fixed Rate Mortgage; Advantages and Disadvantages

One of the advantages that attract borrowers into taking a 15-year fixed rate mortgage is the fact that amortization periods for this type of loan are usually shorter. This allows 15-year fixed rate mortgage borrowers to build equity much quicker. And with a 15-year fixed rate mortgage, the overall interest bills are low; at least, considerably lower than those of longer-term loans. Interest rates of a 15-year fixed rate mortgage are also lower than 30-year loans.

The disadvantages however include significantly higher monthly payments, especially when compared with 30-year fixed rate mortgages. This setback of having a 15-year fixed rate mortgage may restrict home buyers to smaller houses than they might be able to afford with longer-term loans.

There are also other factors to consider when choosing which type of fixed rate mortgage you want to take. Keep in mind that you can actually do a prepayment for your fixed rate mortgage, that way, the principal amount may be significantly reduced each month. In this way, fixed rate mortgages may even be paid off sooner than the projected term.

How Much Can I Borrow For A Mortgage From Mortgage Lenders

I need to know how much can I afford to borrow for a mortgage. You have decided to purchase a home and you need a mortgage; this is the first question you have to answer. How much you can borrow will be decided by the not only where the home is but by the design of the home. Exact amounts will be determined by the actual circumstances. This article will make it easier to answer the question: how much can I afford to borrow for a mortgage?

Net income is a huge part of determining the mortgage amount available for you to borrow. This is figured by taking your income and subtracting expenses. Basic annual salary is considered to be the income of employed people. There are some home loan lenders that will take extras such as overtime into consideration. Finding out how various mortgage loan companies compare on this issue can be done by calling a broker.

The amount that can be borrowed if you are self employed is based on the amount of taxable income that you have. Two years of income is what most mortgage loan companies want to get a clear picture of your income. A self certified mortgage may be an option if there are not two years of accounts available. An understanding of the individual standards can be gotten when you compare mortgage loan companies.

To help them answer how much can I afford to borrow for a mortgage there will be two main methods used after total income has been figured out? The income multiplier is the first method. A multiple of income is used to decide what they will lend you. There are two multiples that are popular, for single income it is three and for multiple incomes it is two and a half. For instance a bank could be willing to lend up to $120,000 if you have up to $40,000 in income.

There are banks that are now using the mortgage affordability calculator instead. Numerous things go into this calculation such as how many children you have and your credit record. Be sure to ask about this due to the fact home loan lenders compare widely on this subject.

How much money the bank will lend you is not what you should base the decision of a mortgage. You should be able to afford to pay the mortgage and maintain your lifestyle. There is no need to buy an exquisite home just to find out you can not make the payments. Make a list of all the expenses you have and take the amount of them from what you bring home every month. Now can you answer: how much can I afford to borrow for a mortgage?

Compare mortgage loan companies to find out how much they would lend you if you went with them. The basic principles may be the same but the criteria and interest charges will vary for each one. You will put forth less effort and waste less time if you use a mortgage broker to obtain quotes on mortgages from a variety of banks for you. The best mortgage brokers will require you to pay a fee for their services.