Mortgages are used to purchase a house or to secure the amount of money you have already owned. There are seven things to consider in a mortgage loan. The mortgage interest rate, the terms of the mortgage and any associated additional points. The kind of interest rate, whether it’s fixed or variable and how it will adjust (is it variable or equal?)
Most people will apply for a mortgage through their mortgage company, although sometimes a bank or private lender will make a loan as well. It’s not a good idea to be blindly led by your mortgage lender as they will not always be up to date with prime rates or with the latest loan options available to you. Also, if you do decide to apply for a loan from a different source, make sure that the company is one that has been in business for at least five years. A reverse mortgage might also be an option, but most people avoid them unless they can’t find a traditional mortgage at a lower cost.
There are several lenders offering mortgages. They can be banks, private lenders such as LeverageRx that offer physician loans, or credit unions. Most borrowers prefer to work with the mortgagee that are members of the National Association of Realtors or the National Association of Mortgage Brokers. These lenders tend to specialize in lending to borrowers who are seeking first-time mortgages and those who have a good to excellent credit score.
Two different types of mortgage are available – an interest only loan and a repayment mortgage. Interest only mortgages are the simplest to understand. The borrower pays interest each month and doesn’t pay off the principal balance. Repayment mortgages require the borrower to start paying off the principal balance after a specified number of years. Both interest only and repayment mortgages have different advantages and disadvantages depending on your circumstances.
If you are planning to refinance your existing mortgage to a lower rate, you should consider an interest-only or a fixed rate mortgage. An interest only mortgage allows you to repay only the interest accrued on the mortgage without raising the mortgage term. For borrowers who plan to stay in their home for a long period, an interest only mortgage can be a good choice as it offers competitive rates. However, the disadvantage is that you may end up paying more interest over the life of the mortgage as compared to a repayment mortgage.
Newer and stricter lending criteria have increased the interest rates applied to loans for first-time home buyers. Before you apply for a mortgage, you should consider the rates offered by competing lenders. Lenders use different methods to calculate their interest rates. You can learn about the different methods used by different lenders and brokers by checking with a mortgage broker or with the Bankrate mortgage calculator.
The prepayment penalty can be a costly and unpleasant surprise for the borrower if the mortgagee finds out that he has opted for prepayment of the mortgage loan while the borrower is still living in the house. However, in general, mortgagee usually requires a few months’ grace period, so it makes sense to shop around for the most competitive prepayment conditions. It is important to note that in some states, lenders are allowed to charge prepayment penalties even when the borrower is still living in the house.
To learn more about the mortgage rates and mortgage terms available in your state, you can use free mortgage calculators at mortgage comparison websites. However, be aware that the information provided in these mortgage calculators is not reliable. The information is only as accurate as the calculations done in the mortgage rate computation process. If you want to get free mortgage quotes for your California residential loans, you can visit Finance Trader, one of the most popular sites on the internet.