What You Need To Know About Mortgages
by: Frederic Madore
Business stuff can be downright confusing especially when confronted with rates, numbers and the banking jargon that seem alien language to you. Still, you do not really have much choice as loans, interest rates and mortgages are words that you can either understand and study or risk losing the roof over your head.
What is a mortgage?
Mortgages is a legal and binding contract that indicates that you have agreed to use your house as security for a loan made. Upon signature, the lender will hold the title deed of the property until after you pay all the money that you owed plus interest. If in case, you are not able to make mortgage payments, the lender has the right to sell the property.
What are mortgage payments
To make it easier for you, the lender will give you opportunities to pay your loan in installment. Some will ask for a down payment, which is a lump sum that you have to pay in order to reduce the amount of money that you have to pay in a certain period of time. The balance of the loan will be divided according to the payment period stipulated in the legal contract. Often, people choose monthly payments as these are easier to the pockets. Others opt for annual payments.
What makes up the mortgage payment?
If you think that you only have to pay the amount that you loaned and nothing else, think again. There are a lot of additional costs in getting a mortgage. In addition to what you originally owed, which in banking terms, is called the principal, you also have to pay for the interest, the property tax held in an escrow account and hazard insurance to protect you from fire, storms, theft and even flood. And unless you have at least 20 percent of your home?s value paid for, you still have to get a private mortgage insurance, which can be really expensive. Some people avoid this by opting to pay for more than 20 percent in their initial down payment.
What are the types of mortgages?
As the name suggests, fixed-rate mortgages offers interest rates that will remain as it is over the entire life of the loan. The 30-year-fixed rate may be a good option for people who will be staying at their home for many years as the payments will relatively be the same. The downside, however, is that interest rates are at their highest level in this kind of scheme as compared to shorter payment scheme pf 20-year and 10-year-fixed-rate.
Another type of mortgages is the adjustable-rate. Unlike the fixed-rate that basically maintains the interest rate, the interest rate of this type is dependent on the market rates and economic trends. Often, the starting interest rate for this is a couple of percentages lower than the interest offered in fixed-rate but because of market dynamics, it can go several points higher in a course of a few years.
To protect you from skyrocketing interest rates, the terms of the mortgage contain a clause that limits the increase of interest rates to a certain level. This is called the caps. Often, the limit is set at a certain rise in interest per year.
The balloon mortgages is a variation of the fixed-rate mortgage except that at the end of a certain payment period, you are required to pay for the remaining balance of the loan, which is often called the balloon payment. This is a good deal especially for people who plan on selling the property and refinancing it again.
What other options are there for home-owners?
The government and the business sector offers a variety of loans that people can avail of to help them. Government loans, for instance, help lower the costs of mortgages.
One of the agencies that offer such is the Federal Housing Administration, which is part of the Department of Housing and Urban Development. The FHA offers a financing program for mortgages that has significantly lower interest rates. While the FHA will not in essence be paying for the loan, it will nevertheless serve as your guarantor. This makes people who do not really fit the traditional bill and requirements able to get a loan. Other agencies like the Veterans Administration and the Rural Housing Service, offers help to niche markets.
About The Author
Frederic Madore is the founder of
http://mortgage-information-center.info
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Understanding A Second Mortgage
Understanding A Second Mortgage
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A Second Mortgage is a Property Lien placed behind a First Mortgage
A second mortgage is a loan that you take against the equity that you have already built into your home by paying off some of the principal balance on your first mortgage loan.
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However, financial advisors will tell you that carrying that much debt on your home is never a good idea.
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Understanding A Second Mortgage
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?Bad Credit? Second Mortgages
Your right to credit is guaranteed by the Equal Credit Opportunity Act. You can?t be denied credit based on race, gender, marital status or ethnicity. But how much money you can borrow and how much interest you will be charged will depend on your credit score.
Credit is easy to get and hard to control. Not using it properly will get you a low FICO score from the three major...
Second Mortgage a Good First Step
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Mortgage rates can either be fixed for the duration of your loan or can be adjustable. An adjustable rate mortgage is a loan that is set up with an interest rate that changes based on pre-determined criteria, primarily tied to the federal interest rate. If the interest rates are up, then your interest rate on your loan will be higher, if the interest rates are low than the interest rate on your loan will go down.
Adjustable rate mortgages (ARM) are generally fixed interest rates for a period of time and then become adjustable. Generally speaking the introductory interest rate for an ARM loan will be lower than a fixed rate mortgage. This is done in order to lower initial payments and allow people to take out larger mortgages, or give them smaller payments for the introductory period. This is attractive to people who may know that their income will be increasing over that period of time.
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Mortgages > Adjustable vs Fixed Rate Mortgages
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Refinancing a first and second mortgage requires some extra considerations. Depending on your equity, you may find that combining the two mortgages results in a higher interest rate. You may also find that you have to carry PMI with the refinanced mortgage.
Will Refinancing Benefit You?
Refinancing two mortgages allows you to consolidate your loans into one payment, often lowering your monthly bill. You may also find lower rates under the right circumstances.
Those with a large amount of equity benefit most from consolidating loans since they qualify for the lowest rates. It is important to look at interest savings, not just monthly numbers which can be misleading.
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