Posts Tagged ‘mortgage terms’
The three main terms every borrower should know
Applying for a mortgage can get confusing for some people. There is a lot of paperwork to sign, documents to read and procedures to be followed.You’d think that you were applying for admission into Standford or MIT, only they don’t require that much paperwork for you to be accepted! Although getting a mortgage can be a confusing process, there are three terms that every mortgage holder should know to better understand what he is she is getting into.
Signing for a mortgage loan while understand a few facts will definitely help you a lot in knowing what you are getting into.
The first word you should know is, oddly, the word “term”.Term refers to how long the mortgage payments will be-or the length of the mortgage borrowed.
Many mortgage loans have terms of 10 to 30 years fixed.Get lower monthly payments by obtaining a longer mortgage, which results in the mortgage lender making more interest. Generally speaking, you should go for the shortest term you can comfortable afford – you’ll save potentially tens of thousands (and in some cases potentially over a hundred thousand) dollars in interest by keeping the length of the mortgage as short as you can.
Next, understand the interest rate on your mortgage and how it is calculated. The interest rate refers to the amount of interest charges you will pay for the money you are borrowing, expressed as a decimal – such as 5.2 for 5.2%. Is it fixed or adjustable? In other words, is it the same through the life of the loan or does it change at specified periods in time? Most home buyers should try and steer clear of adjustable rate mortgages even though they can look better up front.These type of mortgage will adjust to a higher rate resulting in a bigger payment that many people are not ready for!
Lastly, knowing what closing cost are and how these fees will increase your overall price. Often times, you are going to be responsible for coming up with these closing costs out of your own pocket. Closing costs consists of things such as appraisals done on the house, attorney fees, notary fee, deed fee – if there is a fee they can think of it usually falls under the term closing costs! Be a smart and savvy consumer, if you see a fee that you don’t understand or doesn’t seem right – speak up!Some loan officers try to get away with charging extra fees to make a few more dollars in profit.
By knowing these three terms the borrower can make a more informed decision and find the right mortgage.Similiar to any other purchase, you should shop around for a loan program that fits your need when you are in the process of buying a home. Even a small change in the interest rate between two lenders can often to amount to thousands of dollars in savings.It’s important to check around-It’s your money you are paying with!
This article was supported by Irvine home loans and the team at toronto condo for sale
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