Mortgage Refinancing: How to Choose the Right Mortgage For Your Needs
A mortgage is essentially a loan where secured real property is utilized as collateral. You basically borrow money to purchase a house, and in exchange, the bank gives you a mortgage. You then pay back the mortgage with interest, sometime with additional interest. Mortgage loans are often used to obtain money to purchase a new house or to borrow against the current value of a previously owned home.
When it comes to the mortgage process, there are three basic kinds. There is the conventional mortgage, also known as the “hard” mortgage, the ARM or an interest only mortgage, as well as the no documentation mortgage. You will need to know a bit about these before you apply so that you can choose the one that will best meet your needs. Here are some of the features of each one:
– Generally, interest rates on interest only or no documentation mortgage loans will be higher than with the traditional mortgage loans. Usually, you can borrow up to twice the amount of your property as interest on this type of loan. In addition to this, the closing cost for interest only mortgages will often be higher than with the traditional loans. If you plan to borrow a large amount of money, interest only mortgages might not be your best choice.
– One of the biggest advantages of interest only mortgages is that you do not have to make any monthly payments during the initial period of the mortgage. This means that you will not have to worry about missing a mortgage payment because you do not have to pay anything extra. However, you must be careful that you do not become attached to homes that are rapidly appreciating in value. If you want to take advantage of low monthly payments, you will probably want to stay put and wait for the property to appreciate.
– Another option for borrowers who need low interest rates is an adjustable-rate mortgage. These types of mortgage loans will allow you to choose a fixed interest rate and a corresponding fixed rate amortization. With this type of mortgage, your monthly payments will remain unchanged for the full term of the agreement. The loan term may range between fifteen and thirty years. This is the perfect choice for borrowers who are planning to stay in their home for a long time.
– In addition to interest rates on the loans themselves, another factor that is important is the opening and closing costs. There are also closing cost discounts when it comes to purchasing new residential properties. Closing costs are charged when a buyer purchases a new home and pays a property inspection fee. These fees can add up to a significant amount of the mortgage amount, so you need to carefully calculate these charges before buying a new house. You can learn more about your mortgage options, including common mistakes to avoid by registering for a free mortgage guidebook.