Mortgage Advice – Choosing a Bank Mortgage
Mortgages are used for the purpose of borrowing money to purchase a property or to lend money against an existing property you already own. There are several different types of mortgages available to borrowers. Here are seven things to look out for in a mortgage loan.
The size of your monthly payment. Mortgagees usually come with adjustable terms, which means the amount that you will have to repay every month varies. Look for the mortgage with the lowest monthly payment. However, keep in mind that some mortgages come with a higher initial payment. It is important to compare the costs of various mortgages to find out which will be the best for you.
The interest rate. Mortgages come with varying interest rates. To determine the most appropriate interest rate, calculate your present loan balance, subtract your expenses from your future income and divide by your future income. This gives you the mortgage term you can afford. You can use the present value of your home-equity line to choose the right term. Home owners usually borrow against their home equity line when buying a new property.
The interest rates and associated points. Many mortgage deals come with different interest rates and points. You should check with your lender about how much you will have to pay on a monthly basis. Most borrowers opt for adjustable-rate mortgages, as they come with lower interest rates and flexible payment terms.
The closing cost. Mortgage lenders usually require you to pay a certain amount as closing costs. These costs are tax-deductible and may reduce your income before you get your monthly payments reduced. Find out if the closing cost is within the lender’s mortgage amortization table. Some mortgage loans come with variable closing costs.
The annual percentage rate or APR. Mortgage loans come with different interest-rates and loan terms. Before choosing a loan type, look at the Annual Percentage Rate or APR. This figure tells you how much interest you will have to pay over the life-time of the mortgage. The lower the APR, the less you will have to pay in interest. Many borrowers prefer to opt for interest-only and fixed-rate mortgages over adjustable-rate loans with variable interest rates.
The fees and points. There are a lot of fees and charges involved in mortgage loans. Find out the fees you will be paying, especially if you are opting for a fixed-rate loan. Find out the total closing costs that you will have to pay, including any points or closing costs.
The interest-only mortgage and the negative-amortization mortgage. There are some borrowers who choose to apply for mortgage loans with fixed-rate mortgages and those with interest-only mortgages. Each type has its advantages and disadvantages. Interest-only mortgages require the borrower to pay interest only on the first year while the principal remains un-managed. On the other hand, a borrower with a negative amortization can avail of a fixed-rate mortgage but the monthly amortization amount will be higher.