The Mortgage Jungle
Posted by: admin in Real Estate, tags: Adjustable Rate Mortgage, Adjustable Rate Mortgages, Crises, Fixed Rate Mortgage, Greed, Jumbo Mortgage, Jungle, Mortgage Interest, Mortgage Payment, Subprime Mortgage Rate
Owning a home is one of the main ingredients of achieving the “American Dream.” You’re probably reading and hearing about the mortgage crisis in America right now. It’s real, but the main thing to remember is that, like all crises, it will pass – eventually.
The mortgage crisis that we’re facing right now is the direct result of predatory lending practices by lending institutions. People were “qualified” for a mortgage for which they weren’t actually qualified. The subprime mortgage rate combined with adjustable rate mortgages and unadulterated greed was like a balloon filled with too much air. It burst! Lots of people got hurt, and the end isn’t yet in sight.
Nevertheless, owning a home is still part of the American dream, and people are still buying homes. If you are one of those that dream of owning your own home, there are some facts about mortgages that you do need to be aware of. Mortgages are not all created equally.
The Fixed Rate Mortgage: A fixed rate mortgage means that the interest rate will not change for the duration of the loan. If the mortgage is for 30 or even 40 years, the rate that you agree to when you buy the home is the rate that you will still be paying when you make the final mortgage payment. The interest of a fixed rate mortgage isn’t tied to market fluctuations – good or bad.
The Adjustable Rate Mortgage: Unlike a fixed rate mortgage, the interest charged on an adjustable rate mortgage is tied directly to market fluctuations. If you get the mortgage when the interest rate is low, when the interest rate rises, your monthly payment will increase. On the other hand, if the interest rate decreases, your mortgage payment will decrease.
There are other types of mortgages available; the balloon mortgage and the jumbo mortgage are two examples. The main thing is that you investigate your options before you sign on the dotted line.
By: Milos Pesic
What Are Mortgage Points On Mortgage Loans?
Posted by: admin in Real Estate, tags: Boundaries, Fractions, Loan Origination, Mortgage Discount, Mortgage Interest, Mortgage Loan, Mortgage Loans, Mortgage Points, Mortgage Rate, Variations
Since mortgage points can save you a lot of money, it is important for you to understand what they are and how they work.
The interest rate defines the amount of your monthly payments and thus, your monthly installments could be defined using 1% of your mortgage loan amount as a factor. That is exactly what a mortgage point is: the unit that describes how expensive or inexpensive the costs of a mortgage loan are and any variations are also computed in mortgage points.
Different Mortgage Points
The interest rate charged for the loan can be minced into smaller portions and the reason for the raise or the reduction can be identified. Thus, whenever a variable reduces the interest rate by one point, we say it reduces the risk involved in the transaction. On the other hand, whenever a variable raises the interest rate by one point, it is said to be the reason for origination of risk.
For instance, certain points can be purchased. This actually implies a down payment on your loan that obviously reduces the interest rate you’ll end up paying for your mortgage loan. These points are therefore discount points and the cost of them will vary according to the loan amount you have required when you applied for the loan. A Mortgage point is equal to 1% of the loan amount.
Flexibility and Limits
There’s a lot of flexibility when it comes to mortgage points. You can obtain mortgage discount points by paying in advance the equivalent to 1% of the total amount of the loan. Origination points are charged for administrative costs, closing fees and different fees and costs charged by the lender for a particular loan.
However, there are limits that cannot be bypassed. Your interest rate cannot be reduced or increased beyond reasonable boundaries. The limit depends on the type of loan and lender but on common mortgage loans it usually reaches around four points.
Each mortgage point can be divided into fractions and usually does as many variables only reduce or increase the interest rate half a point or a quarter of a point. Thus, you can purchase half a mortgage point too to obtain an interest rate reduction.
Acquiring Discount Points
The benefits of acquiring discount points are variable and depend mainly on the length of the repayment program and your plans as regards to the property. If you plan to retain ownership of the property for many years, then, getting discount points is a smart idea because you can spread the payments over the whole life of the loan and get low monthly installments you’ll be able to afford without sacrifices while you enjoy the property.
But, if you don’t want to retain ownership of the property for such a long time, it makes no sense to put money down, when you will be selling the property in the near future and you could transfer the costs to the next owner by accepting a higher interest mortgage loan with no down payment that you won’t have to repay in full.
By: Kate Ross
