You may have seen the numerous commercials on television advertising the great mortgage rates a particular lender offers. Usually the item people respond to most is “low interest.” Hence, that is what they tend to push. But there is a lot more to a mortgage than just the interest. You are borrowing money – you already know that interest is a given when doing so. It is the same with student loans or credit cards, and while low interest is always great, there are several things you get to choose from when it comes to the right mortgage for you.
Interest Rates We’ve already established that low rates are in season (or so the commercials say) and that they are quite appealing, but what else is there? Mortgages tend to come in two packages: Fixed rate and adjustable rate (sometimes known as variable rate). The two are fairly straightforward but can give you very different things. A fixed rate will stay the same throughout the life of your loan. Your credit history and other financial information can help to determine what this rate is. An adjustable rate can be a bit like a gamble, but many people still request it. When you choose a mortgage with this type of rate, it means your interest rate can dip down, going even lower than what the typical fixed rate might be. While this is appealing, the rate can also go above the typical rate. The lender uses a specific index to determine the fluctuation of the interest rate, and important to note about adjustable rate mortgages is that though the rate can decrease and increase, it does have stopping points. So for those worried about a continuously growing rate, there is no need for concern.
Mortgage Life Mortgages have different amounts of time that can be attributed to them. The most popular and typical is the 30-year mortgage. This is how long you will have to make payments on your mortgage in order to fully repay the amount of money you have borrowed. Various sized mortgages can have 30 years to be repaid, as long as the lender has determined you will be able to make such payments. The difference is in the payment size. You do not have to get a 30-year mortgage if you do not want to. You may get a 25-year mortgage and there are even 50-year mortgages available. Generally, your lender will find a mortgage to suit your particular financial income, and you can always negotiate new terms when you decide to refinance.
Payments The payments you make can help to determine the life of your mortgage, as mentioned above. While a lender may make suggestions on payment options, you may be able to request something different depending upon your income and what you feel certain you will be able to handle. For example, currently your income is $45,000 per year and you are moving to a new house. The reason you are moving is because of a promotion that will allow you to earn $50,000 per year, but the promotion will not go into effect right away. You can let your lender know of this fact because by the time you start making mortgage payments, you will be able to afford more than you would have previously. Larger payments may shorten the life of your loan (unless they mean you have a very large mortgage) and in some cases, can ultimately save you a little money by cutting down in interest.
