Mortgage Loans: Compare Interest Rates & Terms
If you are looking to purchase a new home, one of the most important financial decisions you will make is getting a mortgage loan. A mortgage is a large commitment that should not be entered into lightly. While there are many attractive home loans available today, not all of them will suit your situation. The first step in finding the best mortgage is to carefully consider the criteria for each loan you are considering. Here are seven things to watch for when shopping for a mortgage loan.
The term of the loan. Short-term loans, such as mortgage-backed securities and interest-only mortgages, come with their own risks. Interest-only mortgages offer a lower initial payment amount but come with a long interest-only payment schedule that will deplete your nest egg quickly. Short-term loans also require more advanced financing than long-term options. When comparing loan terms, it is wise to evaluate whether shorter loan term lengths will save you more money over the long run.
Mortgage rate. Most mortgage lenders offer fixed-rate mortgages for new property purchase. Fixed rates typically have reasonable interest rates and terms that are most beneficial to borrowers. Some adjustable rate mortgages (ARM) feature introductory interest rates that are lower than those offered with fixed-rate mortgages. However, when the ARM reaches its maturity date, your mortgage will shift to a different interest rate.
Mortgage insurance premiums. Many lenders offer some type of mortgage insurance protection. Mortgage insurance premiums are calculated based on a percentage of your loan amount. The larger the percentage you pay, the higher your monthly mortgage payment will be. However, if you have an impound account and find that your monthly mortgage payment exceeds the amount of your insurance premiums, you may benefit from refinancing.
Collateral. Many mortgages include a type of collateral known as an “asset.” This asset is used as security for the mortgage, and the borrower is required to return it to the lender when the loan is repaid. It is typically the car or house that most people use as their “asset,” but any tangible property, such as jewelry, electronics, artwork, or cash are other acceptable collateral.
Refinancing is one of the most effective ways to lower your monthly budget. To learn more about mortgage loans and the lenders who offer them, contact a mortgage broker today. They will be able to guide you through the process and provide information on mortgage programs that are available in your area. Be sure to visit the Bank Rate website before making your application to ensure that your lender is registered with Bank Rate’s automated mortgage approval system. As you search for the best mortgage for your financial needs, be sure to check out Bank Rate’s mortgage loans and mortgage rates page.