How a Fixed Rate Mortgage can be Beneficial When Buying a Home

If you are just about to buy a house, one of your most important decisions, almost as important as which home you buy, is what type of mortgage to take out. You basically have two choices; a fixed rate mortgage (FRM) or an adjustable rate mortgage (ARM) Choosing a mortgage that best fits your specific needs can potentially either save or cost you a great deal of money over the term of the mortgage.

Around 70% of homebuyers today choose a fixed rate mortgage, rather than an adjustable rate mortgage. A fixed rate mortgage is exactly what it sounds like. The interest rate on the loan doesn’t change, regardless of whether interest rates in general go up or down. An adjustable rate mortgage may go up or down, depending on the interest rate at the time. Your decision may be influenced by your overall financial situation, the present state of the economy and the cost of your house.

The overall amount that you end up paying for your home can be greatly influenced by even a small change in the interest rate. A lowering of the interest rate by just one point can mean that a homeowner with a 30 year mortgage can enjoy average savings of around $50,000 over the term of their mortgage. An increase in the interest rate of just one or two percent can mean monthly payments that are between $50 and $250 higher, depending on how much you paid for your home. Whether you are taking out a 15 or 30 year mortgage may also influence your decision to take out an adjustable rate or fixed rate mortgage.

The biggest benefit of a fixed rate mortgage is the peace of mind that comes with knowing that regardless of how bad the economy is the rate on your mortgage loan won’t increase; neither will your monthly payment amounts. In fact, the terms and conditions of a fixed rate mortgage are protected by law. A fixed rate mortgage is an ideal option for those buyers who just don’t want to take a risk, or consider themselves the cautious type when it comes to finances.

Another benefit of a fixed rate mortgage is that it makes it easier for the homeowner to budget the expense. Your mortgage payment is probably your single biggest expense and you always know exactly how much the monthly payment will be. Some buyers believe that this makes it a little bit easier to plan and budget for some of life’s other big expenses. Certain things like college funds and retirement for example. With a fixed rate mortgage, the amount of the monthly payment will only increase if there is an increase in the amount of insurance rates or property taxes.

A fixed rate mortgage is not affected by inflation or the cost of living. Supposing you have a monthly mortgage payment of $700; this amount will still be the same after five, ten, and twenty years have gone by. Even though everything else has increased in cost, your mortgage payment will stay the same. One way to offset this is to consider the possibilities in the future. Chances are you could have a more disposable income as time passes. You could be earning a higher salary, but still paying the same every month for your home.

If you prefer the safer option of the fixed rate mortgage, one solution would be to take out a fixed rate mortgage and then refinance your loan if and when interest rates are lowered. This approach keeps your options open. If interest rates go down sufficiently to justify the cost of refinancing, you can do just that; if rates stay where they are or go up you will be glad you have the fixed rate mortgage. Some financial experts advise that it is only worth refinancing if the interest rate will be at least 2% lower than your current rate, although that decision entirely is up to you.

Another strategy that can be applied towards either a fixed rate or adjustable mortgage is to pay an extra amount each month towards the principal. By doing this regularly, you can potentially save a large amount in interest charges. It can also make the term of the mortgage shorter and you may be able to own your home sooner. Make sure that you specify that any extra amount that you pay is going towards the principal and not the interest. By doing this, if you have a fixed rate mortgage and the rate is not as low as it could be, you are getting ahead a little bit.

Ultimately the decision of whether to take a fixed rate mortgage or an adjustable rate mortgage is yours. Although several factors may influence your decision, one of the biggest questions to ask yourself is how much of a risk you want to take.

About the Author

Shawn Thomas is a freelance writer who writes about economic issues and financial products pertaining to the mortgage industry such a fixed rate mortgage as well as the lowest mortgage rates.

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Mortgage Security not That Costly

Forget everything you thought you knew about the benefits of taking a variable-rate mortgage instead of locking in for the long term.

A new study suggests the security of a five-year mortgage costs little or nothing beyond a riskier variable-rate mortgage, providing you get a jumbo-sized rate discount.

"Interest costs on discounted closed five-year mortgages have been close to, and often lower than, those of variable-rate mortgages since late 1996," senior Canada Mortgage and Housing Corp. economist Ali Manouchehri writes in the study.

Homeowners have made variable-rate mortgages hugely popular in the past few years in the belief that you can save on interest costs by pegging your mortgage rate to your lender's prime lending rate. As the prime rises, or as has generally happened in the past few years, fallen, so goes your mortgage rate.

The prime rate at the major banks is now 4.5 per cent, while the posted five-year rate at the big banks is 6.15 per cent. In just one year, the variable-rate choice would save you about $1,700 on monthly payments toward a $150,000 mortgage amortized over 25 years (assuming a level prime rate).

Historically, you would also have saved a lot. The CMHC study shows that five-year mortgages taken out from 1993 through 1998 would have cost anywhere from $50,000 to $5,000 in additional interest paid over the term of the loan (the example is based on a $100,000 mortgage amortized over 25 years).

The flaw with this analysis is that it doesn't reflect real-world mortgage pricing. These days, very few people take out a mortgage without a sizable discount off the posted rates at major banks.

For that reason, the CMHC's Mr. Manouchehri decided to compare discounted five-year mortgages with discounted variable-rate mortgages. Incidentally, five years is the most popular term by far for fixed-rate mortgages at about 59 per cent of the total.

The size of the discounts Mr. Manouchehri applied was based on the difference between posted major bank rates and the best deals available from other lenders. For five-year mortgages, he used a discount of 1.25 of a percentage point; for variable-rate mortgages, it was 0.4 of a point off prime.

For five-year mortgages taken out between 1993 and mid-1996, the five-year mortgage was costlier in terms of interest costs. Since then, however, variable-rate mortgages have generally been a little bit more expensive.

Obviously, there's nothing in this study that decides the fixed-rate versus variable-rate debate once and for all.

In fact, the CMHC study may just confuse anyone who recalls some research done for Manulife Financial back in 2000 by York University finance professor Moshe Milevsky. His research found that the extra interest charged on a five-year mortgage would have cost $20,000 on average between 1950 and 2000 for a $100,000 mortgage amortized over 15 years.

To make some sense of the variable-rate versus five-year question, let's go back to the CMHC study.

It shows that five-year mortgages, discounted or otherwise, were especially bad choices for a three-year period starting in mid-1993. Rates were high for a while back then, but they subsequently fell.

You were a spectator to these rate declines if you were stuck in a five-year mortgage, while people in variable-rate mortgages would have benefited almost immediately.

It's a different world now, though. Five-year mortgage rates are close to a 50-year low, which suggests they're far more likely to rise over their term than fall.

So what's the best choice here, variable-rate or five-year fixed rate? People who want to pay rock-bottom mortgage rates for as long as possible will probably still want a variable-rate mortgage. Remember, you can lock this sort of mortgage into a fixed term without penalty in most cases.

The case for the five-year term looks almost as strong, though. First, the CMHC study tells us there may not be a significant cost to locking your mortgage in for five years, and you might even save a little over a variable-rate mortgage.

Second, the likelihood of higher rates in the years to come would suggest that this is a good time to lock in.

If you had a variable-rate mortgage discounted to 4 per cent, the prime would have to go up by 0.85 of a percentage point to equal the current five-year rate. That's not a lot of ground to cover in the span of 12 to 18 months when the economy is doing well.

Arguably, the variable-rate versus fixed-rate debate is all about risks and rewards. Right now, the five-year option offers much less risk, and almost as much reward.

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Basic Features Of Fixed Rate Mortgage

A fixed rate mortgage is a loan where the interest rate remains the same for the life of the loan. The initial interest rate is often higher than an adjustable rate, but produces stable monthly payments. A fixed rate mortgage is good for those who want to always have the same monthly payment and do not want to risk having a higher monthly payment or benefit from a lower monthly payment that an adjustable rate may produce. With predictable payments, long term homeowners can plan their budgets and guard against rising interest rates. But a fixed rate mortgage is not for everyone with its higher interest rates and a reduction in your buying power.

With a number of lenders, the rates will not remain the same through out the duration of the loan. The rate will remain the same only for a certain period. This period varies with lenders. Usually the initial interest term will last for six months to five years. At the end of the period, your rate will be recalculated on the basis of lenders standard variable rate. When you shop for the cheapest fixed rate mortgages, look beyond the initial interest rate.

Another thing to watch out for is additional charges. There can be many additional charges that you wont pay attention to. But they can make a big difference in the end as the charges may add up to a huge amount. Make a comparison of all the charges such as cancellation fees, survey costs, closing fee and application fees.

Its unique features include set rates, long term low monthly payments, and low risk. Interest rates are decided according to market rate prevalent at the time of finalizing the loan. If you are able to have valuable collateral, strong repayment ability and a large down payment, you will be a given a very attractive options with lower interest rate. The long term low monthly payment schemes are very beneficial because even though prices increase in future, your mortgage payment and rates remain the same. Also, costs will become smaller if your salary or incomes go up during the times ahead. You can also repay your loan early, saving money on interest payments.

However, due to the current financial recession facing the world economy these days, cheap deals are available for only those with larger deposit and equity. The situation has made lenders impose more restrictions for approving loans and tightening their lending criteria. If you are a borrower you need to adapt to this fast changing environment.

Typically, the tenure of the mortgage is 30 years with low monthly installments which makes them the first choice for middle income borrowers. Because of the longer tenure, the interest rate associated will be higher. A shorter term product such as 15 year tenure is also popular because you do not have to pay as much interest as with the first one, but will need to pay more on monthly installments. Other than these types, there are 40 year and 50 year fixed rate mortgages available. But they are not much in demand because borrowers do not prefer to be under the burden of a single debt for such a long period.

It is important to look at the terms which may include interest rates, monthly payments and fees. A fixed rate loan is simpler than an adjustable rate loan, but still you must look at the interest rate, the margin, and any fees or points that you may have to pay. Hence you need to ask about fees and points because they may not be clearly outlined or expressed in the documents. If you are not careful, you will be surprised by a fee or points that were not added originally, but were disguised in small print.

There are also a few drawbacks to fixed rate mortgages. To take advantage of falling rates, mortgage holders would have to refinance. That can mean a expenses in closing costs, and several hours spent to deal with tax forms, bank statements and so on. Some options can be too expensive for some borrowers, especially in high rate environments, because there is no early on payment and rate break.

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Buy To Let Mortgage Refinancing

The buy to let mortgage allows the borrower to purchase a property. Then, the property can be rented to the tenant. The tenant pays the rent in which the borrower uses to pay the mortgage payment.

The borrower benefits from buy to let mortgages by creating the home equity. As long as there are tenants, the borrowers never need to use their own money to pay the mortgage payment. Eventually, the borrower can sell the property at a higher price.

The mortgage lenders may approve many types of buy to let mortgage refinancing. That includes fixed rate, variable rate, capped mortgage, discounted mortgage, cashback mortgage, and interest only mortgage.

In a fixed rate mortgage, the borrower pays the same interest rate on all the payments. So, the borrower pays the same mortgage payment on each payment period. This is conventional way to finance a property.

In a variable rate mortgage, the borrower pays the current interest rate. The interest rate fluctuates from time to time. As the interest rate increases, the borrower pays less on the principal. As the interest rate decreases, the borrower pays more on the principal.

In a capped mortgage, the borrower pays the current interest rate up to the maximum interest rate. The mortgage lenders set the maximum interest rate that the borrower pays. If the current interest rate went past the maximum interest rate, the borrower will only pay the maximum interest rate. If the current interest rate went below the maximum interest rate, the borrower pays a lower interest rate.

In a discounted mortgage, the borrower pays less interest rate than the current interest rate. For example, the current interest rate is five percent. The mortgage lenders charge one percent below the current interest rate which is four percent.

In a cashback mortgage, the borrower gets a certain percentage from the mortgage. For example, the mortgage lender gives three percent cashback on a $100,000 mortgage. So, the borrower gets $3,000 (3% x $100,000).

In an interest only mortgage, the borrower only pays the interest rate up to the end of mortgage term. So, the borrower does not pay off the mortgage. At the end of the mortgage term, the borrower pays the normal amount of mortgage payment.

Dennis Estrada is a webmaster of mortgage calculators, buy to let mortgages, and discounted mortgage website.

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Adjustable Rate Mortgages and Its Features

An adjustable rate mortgage, or ARM as it is popularly known as, is a mortgage loan[1] in which the interest rate on the note[2] is periodically adjusted based on a variety of indices[3]. Different lenders use different indices to calculate their interest rates, or their adjustable rates. Some of the commonly used indices are the 1-year constant-maturity Treasury (CMT) securities, the Cost of Funds Index (COFI), and the London Interbank Offered Rate (LIBOR). However, a few lenders prefer to use their personal or own indices to determine the rates. Lenders may choose to do this to avail a steady margin from the borrower, and their own cost of funding is related to the index. As a result, the payments made by the borrower may also change over time in accordance to the fluctuations in the resultant interest rates. Typically, the adjustable rate mortgages are characterized by their index and their limitations on charges or caps[4]. In many countries, the adjustable rate mortgages are the standard means of availing finance by offering the homes as securities, and in such cases, the credit facility is simply referred to as a mortgage.

Basic features of ARM or adjustable mortgage
The main features of ARM are:

1. The initial interest rate
   It is the rate of interest associated with the ARM at the time of conception of the loan facility. The initial ARM rate is generally well below the existing current ARM market rates charged during subsequent years.
2. The adjustment period
   This is the actual length of time, of the total loan period of the ARM, which is scheduled to remain constant or unchanged. The interest rate is reset at the end of the adjustment period, and the monthly loan repayment options are recalculated.
3. Index rate
   Majority of the lenders prefer to associate the ARM mortgage interest rates changes with changes occurring in a particular index. As stated previously, lenders generally set the ARM rates on a variety of indices. The most common index rate used is one, three, or five years treasury securities index. Another commonly used index is the national or regional average cost of funds to savings and loan associations index.
4. The profit margin
   The profit is calculated by adding a certain percentage of the loan amount to the amount of the base index rate. The difference of the net payable loan amount minus the base index amount is the actual profit enjoyed by the lender in an ARM.
5. Adjustments and interest rates
   ARMs provide a unique adjustment period for borrowers during the inception of the loan facilities. The rate structure can change at the end of the adjustment period. However, several lenders provide more than one adjustment periods. It is possible for the borrowers to change certain aspects of the net payable interest rates with each new adjustment period. So there is an advantage to avail different interest rates with individual adjustment periods. If the borrower is market savvy, he or she can select different indices or interest rates and save money, provided the lender agrees to the rates and indices.
6. Initial discounts
   Initial discounts are interest rate concessions, and are very commonly used as promotional aids to attract customers for ARMs. Such discounts are only offered during the first year of the ARM loan. The discounts help to reduce the interest rate below the prevailing rate for a certain duration of time so the borrower can save some money through temporary reduced rates.
7. Negative amortization[5]
   Ideally, the net chargeable interest rate decreases with a regular payment of monthly dues against any credit borrowings. In case of mortgages the rates decrease over a period as loan pay offs occur. However, in case of ARMs, the reverse happens, and the mortgage balance actually increases whenever the ARM base index rates climb up. As the ARM base index increases in magnitude, its associated interest amount and repayment cap also increases, and the borrower ends up paying a greater amount to redeem the loan. This is a negative feature of ARMs and the borrower may suffer a certain loss over the loan tenure until redemption occurs.
8. Conversion to a different loan format
   ARMs have an agreement according to which the borrower can convert the ARM to a fixed-rate mortgage at designated times. This is often a fall back facility in case the ARM does not work in the borrowers favor and the buyer wants to revert to a safe option of a steady rate of interest.
9. Loan prepayment
   In majority of loans and credit facilities, lenders prefer the borrower redeem their dues as soon as possible, to recover the original lending amount. However, in case of ARMs a prepayment can result into a potential loss for the lender in the long run. So lenders generally include a clause in the ARM agreement which may force the buyer to pay special fees or penalties in case the borrower decides to pay off early. ARM prepayment terms are usually negotiated in the beginning before the credit facility is availed.

Summary
Even though ARMs have a low starting interest rate, there is no indication that the future cost of borrowings will be maintained at the same rate, since the base index rate is likely to change. If the indices rise, the net ARM cost will also be higher, and the borrower will have to pay a higher loan amount. So there is an inherent risk involved with ARMs. Certain studies indicate that on average, the majority of borrowers opting for adjustable rate mortgages save money in the long term.

Legend
[1] A mortgage loan is a specific type of loan, which is secured by some property or a fixed asset value having a certain financial value through a lien, or a legal written commitment empowering the creditor to sell the security offered in order to recover the outstanding dues, in case the creditor is unable to pay or redeem the borrowed amount. The word mortgage when used alone, in day-to-day life, is often used to convey a mortgage loan.

[2] A written promise to repay or redeem a specified borrowed sum of money, along with its interest at a predefined rate and length of time.

[3] An index rate is a widely used rate of interest generally used by lenders to set the interest rate on loans and credit cards.

[4] Loan capital or amount.

[5] Amortization is a gradual reduction in the value of an asset or liability by some predetermined process. In case of loans, it means a gradual or specific decrease in the magnitude of the net payable interest amount over a period, until the entire loan amount becomes void and is deemed as paid.

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Mortgage Modification | Adjustable Rate Mortgage | Fixed Rate Mor

The loan structure is one of the first decisions you’ll have to make when taking out a mortgage. The two main types of mortgages are fixed-rate and adjustable rate, the main difference being the way your interest is calculated. Each structure has its own pros and cons, and it’s important to know which one best suits your situation. This article lists some of the basic differences between the two.

Fixed-rate Mortgages
A fixed-rate mortgage, as the name suggests, uses a single interest rate for the life of the loan. The main advantage of this loan is stability: because the rate never changes, your monthly payments remain the same regardless of the market situation. Fixed-rate mortgages are typically offered in 10-year, 20-year, and 30-year plans. Some loans also have a bi-weekly option, which allows you to make extra payments and pay off your loan sooner.

On many fixed rate mortgages, you start off paying more interest than principal in your early payments. But since your principal gets smaller each year, the situation eventually reverses and more of your payments are counted against the actual cost of the loan.

The fixed rate doesn’t apply to property taxes and insurance premiums—these are controlled by the government and your insurance provider respectively. But since your monthly payments are mostly made up of principal and interest, you can expect fairly stable payments with only minimal changes.

Adjustable Rate Mortgages
An ARM bases its interest on a third-party index that determines the market interest rate. This means that your interest rates can change from time to time, depending on current market indicators. Some of the commonly used references are the Certificate of Deposit Rate (CD), the Treasury Security Rate, and the Cost of Funds Index (COFI) of the Federal Home Loan Bank.

To protect borrowers from drastic increase, most ARMs impose a cap on either the payment itself or the change in interest rate. For example, a mortgage may allow a maximum increase of 2% each year, no matter what the current rate is. Others may cap the actual amount your payments can go up. Ideally, this will be a “lifetime cap”; that is, the cap applies throughout the life of the loan.

ARMs typically have an introductory period where you pay a fixed or low interest rate for the first few years. This scheme is designed to attract more borrowers, especially in the sub-prime market. Many people take advantage of this structure by enjoying the introductory rate, and then selling or refinancing the home when the rates shift back to normal.

If you are in an adjustable rate mortgage that you cannot afford you may qualify for a loan modification. Mortgage Loan Modification allows you to work out better terms with your lender, and pause the foreclosure process while negotiations are under way. This is especially ideal for people in adjustable-rate sub-prime loans, which have reverted to higher rates in recent years. To know more about mortgage loan modification consult your mortgage loan modification attorney.

About the Author

The Loan Modification Department is composed of a team of Mortgage Loan ModificationAttorneys, Mortgage Professionals, and Hardship Analysts. Lead by Expert Mortgage Loan Modification Attorney, Marc R. Tow, Loan Modification Department has helped thousands of American Home Owners save their Homes and decrease their loan payments. For more information Just Call 800-738-1170 or Visit our website http://www.cdloanmod

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Pick the Right Perks for your Adjustable Rate Mortgage

These are heavy days for Canadian homeowners. If you've been in your home even a few years, you've probably already enjoyed a modest climb in the value of your home. Even if you don't intend to sell, it's good to know that your real estate investment is doing well. But we're also enjoying an environment in which mortgage rates have reached historic lows.

That combination -- strong valuations and low mortgage rates -- has an unprecedented number of Canadians looking for ways to capitalize on the great opportunities available to them.

Whether it's to buy their first home, trade up, or take equity back out of their homes, Canadians are jumping at the opportunity to borrow at today's rock-bottom rates.

While many homebuyers are reconsidering the value of fixed-rate mortgages to lock in those low rates, you should keep in mind that adjustable-rate mortgages - the darling of the dropping rate trend - can still offer real value to homeowners. It's a matter of finding the right combination of mortgage features and options.

As banks have been joined by other lending institutions, we have seen our menu of ontario mortgage options grow accordingly - with some innovative new mortgage types now available to help Canadians take advantage of today's unusual opportunities.

One of the most innovative mortgages we've seen in a very long time is a new adjustable-rate mortgage with some very compelling features. First, it's based on an institutional rate benchmark known as Bankers Acceptance. Most of us are familiar with the rate benchmark known as Canadian Prime - and we are accustomed to assessing mortgage rates based on Prime. The BA, on the other hand, is the rate at which banks will lend money to one another - and it's typically a lower rate (sometimes much lower) than the prime rate offered to a bank's best customers. The new BA-based mortgage - compared to the best prime-based mortgage available - could have saved a mortgage client a bundle over the last several years, primarily because the prime rate tends to be "stickier" in an environment where rates are falling. Often, the more fluid, market-based BA rates deliver the rate change more quickly. The BA rate is no trade secret, by the way; pick up a copy of your favourite financial paper and look for the published money rates to find the Bankers Acceptance Rate.

But the attractive rate structure is not the only perk. The same BA-based mortgage - so welldesigned to help clients wring the last quarter point from their mortgage rate - now also comes with a rate cap which guarantees that your rate will never climb higher than 2.15% above the starting base rate - no matter what happens to rates during your mortgage term. There's no worry about locking in too high because the rate is always adjustable down.

Only the ceiling is fixed. It's a homebuyers' dream:

A mortgage with limited upside and unlimited downside. If you're thinking about buying a home this year, or you haven't had your mortgage reviewed in the last several months, take the opportunity to get an expert assessment of your many options from a mortgage professional. It could be the best investment you'll make this year!

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Tips For Locking in the Best Home Mortgage Rate

Tip #1: Always Shop For Home Mortgage Rates

Don't blindly accept a Realtor or Builder referral to apply for a Home Mortgage through their preferred lender. Many times they will say, "We work closely with this guy and he gets the job done". Translation: "We play golf together and he buys the beer". Remember, the Realtor won't be paying the bill each month for the next 30 years, you will.

Mortgage Loan Officers that work off of a referral network of Realtors and Builders don't have to have competitive Home Mortgage Rates because they have a steady stream of "Drones" (people who are referred to them and don't shop) calling them. Shop around, get the lowest cost Home Mortgage Rate, then if you are inclined, approach the "preferred" Loan Officer you were referred to and ask him to match the quote.

If you apply for a Home Mortgage through a preferred lender without shopping, you will pay hundreds or even thousands of dollars in additional costs.

Tip #2: Call For Home Mortgage Quotes After 11:00 a.m. Eastern Time

Mortgage Rates change each day and sometimes midday. The previous day's rates typically expire by 8:30 a.m. the next morning. Generally, Home Mortgage Rates are published each day by 11:00 a.m. Eastern time. This varies from lender to lender. To make sure you are getting Home Mortgage Rates from the current day and not a mixture of rates from the previous day from some lenders and the current rates from other lenders, always do your rate shopping after 11:00 a.m. Eastern time.

Get all your quotes after 11:00 a.m. Eastern time.

Sometimes Home Mortgage Rates change midday due to a volatile bond market. When this happens, some Home Mortgage Lenders will adjust the Discount Points for their rates in accordance with the new bond prices and publish new Home Mortgage Rates for that day. Other Lenders may continue to honor their morning rates.

Tip#3: Always Tell The Mortgage Loan Officer You Are Prepared To Apply For A Loan NOW

If you are buying a home, tell the Home Mortgage Loan Officer you are Rate shopping and you have a "ratified contract" to purchase a house. Tell him you intend to make a decision and Lock-In a rate on that day, but you have to check a few other lenders. If he asks you how his rates compare to the others, tell him he's the first person you've called. If you are refinancing, tell the Home Mortgage Loan Officer you are ready to apply for a Refinance Home Mortgage today. If you don't tell him that, he may provide a fake Home Mortgage Rate quote.

Loan Officers know you will probably talk to another lender with lower Home Mortgage Rates and the only way he can be sure for you to call him back is to give you a fake quote that appears to be the lowest. He's expecting you will rate shop for several days and figures you will call him back in a day or two because he provided a low, bogus rate quote. Also, since Home Mortgage Rates change daily and are subject to change at any time, he's not concerned about giving you a fake quote.

How will you compare quotes if you don't know which quotes are real and which are part of a bait and switch plan? The only way to ensure getting real quotes is to box in the Home Mortgage Loan Officers by making them think you are ready to Lock-In a Home Mortgage Rate immediately.

Tip#4: Ask For The Total Points And The Total Fees

When you call a Mortgage Lender, ask for the "Total Points" (Discount Points, Loan Origination Fee, Broker Points) for each Home Mortgage Rate. Some lenders will only quote the Discount Points and deliberately leave out the Loan Origination Fee. You won't find out about the 1.00 Point Loan Origination Fee until you apply for the Home Mortgage. By that time, the Loan Officer figures you will just accept it because he's got your application and pulled your credit report. In addition, Mortgage Brokers often neglect to mention their Broker Fee.

Some lenders do not charge a Loan Origination Fee.

When you are quoted the Total Points, specifically ask them if there is an additional Loan Origination Fee or Broker Fee being charged. You truly have to nail this down when you talk to a Home Mortgage Loan Officer.

Also, ask for a list of ALL other fees that will appear on the Good Faith Estimate that you will be paying to the Lender or Broker. Make sure they include their Credit Report and Appraisal Fees. Some lenders charge one lump sum fee and that includes the Credit Report and Appraisal Fees while other lenders will itemize each fee. Keep it simple and ask for all fees, including the cost of the credit report and appraisal fees.

Don't get confused by Title Company, Attorney Fees or Escrows. A lender will estimate these on your Good Faith Estimate, but these charges are not related to costs associated with a Mortgage Rate quote. The amount required for your escrow account will not change from lender to lender and Title Company and Attorney Fees are not being charged by the lender. Don't include them in your comparison.

Tip#5: Always Confirm The Rate Lock Period When Asking For A Rate Quote

If you are buying a home and you need 60 days to close, make sure you specifically request Mortgage Rate quotes with a 60 Day Lock period. Some Home Mortgage Loan Officers will quote rates with 15 Day or 30 Day Lock periods because the Discount Points for shorter lock periods are less than rate locks for longer periods. Quoting a Home Mortgage Rate with a 15 Day lock period obviously gives that Loan Officer an unfair edge. It is also a waste of your time because the quote isn't real if you can't settle on your loan within 15 days. Always specify a 60 Day Lock-In if you are buying a home. Ask for 45 Days if you are refinancing, but you may be able to get it done within 30 days if you are very diligent and call your Home Mortgage Loan Officer twice a week for a status of your application.

If your rate lock expires, the lender will re-lock you at the higher of either the original rate or the current rate when you decide to re-lock. That's a LOSE/LOSE situation for you. Never let your rate lock expire.

Tip#6: Compute The Dollar Cost Of The Points And Add All Fees

After you've spent some time talking to a bunch of Mortgage Loan Officers, you will have lots of Rates, Points and Fees on a sheet of paper. You will need to compute the dollar cost of the Points (multiply the mortgage amount X the Total Points expressed as a percent; For example, multiply 400,000 mortgage amount X.625% for.625 Points). Then add the dollar cost of the points to the Total Fees. You can then compare each Home Mortgage Lender's Total Cost (dollar cost of the points + all lender related fees) for a given rate. That will show you which Home Mortgage Lender has the lowest cost Home Mortgage Rates.

If Mortgage Insurance (not to be confused with mortgage life insurance) is required on a Conventional Home Mortgage, ask for the cost per year expressed as a percent and compare it from lender to lender. Some lenders require different levels of coverage and this will affect your monthly Mortgage Insurance payment. In addition, lenders use several different mortgage insurance companies and they charge different rates for their coverage. The lender will select the mortgage insurance company.

The cost of Mortgage Insurance can vary from lender to lender even though most Home Mortgage Loan Officers will say, "We don't determine the Mortgage Insurance coverage, Fannie Mae and Freddie Mac do". Your can just say, "Please humor me and provide the Monthly Mortgage Insurance expressed as a percent".

You will want to check the quoted percent with what is on your initial application documents and final loan documents to make sure the Monthly Mortgage Insurance payment isn't higher than what you were quoted. If it is, get it reduced immediately. If they won't do that, then ask them to reduce your Home Mortgage Rate by.125% and that should cover the difference.

If you are getting a government insured mortgage (FHA or VA), you don't have to get into a comparison of the FHA MIP or the VA Funding Fee. This is a cost you will be paying, however every lender MUST use the same costs, so there is no reason to attempt to compare these costs from lender to lender.

Tip#7: When You've Found The Lowest Cost Rate, Apply and Lock The Rate

While you were looking for houses or thinking about refinancing, you may have shopped around and gotten some quotes from lenders and narrowed down your search to the best 5 Home Mortgage Lenders or Brokers. But when it is time to apply for your Mortgage, make sure you update your quotes for the 5 lowest priced Home Mortgage Lenders. After you identify the Home Mortgage Lender with the lowest cost rate, call and apply for the loan. Tell the Home Mortgage Loan Officer you want to Lock-In your Home Mortgage Rate and apply NOW. If the quote has changed since you updated your quotes a couple of hours before, tell the Loan Officer you want him to honor the previous quote. If he won't do it, tell him you may call back. Then call the next cheapest Home Mortgage Lender on your list. If that lender tells you the same thing, you can go back to the first lender and proceed with the application process.

Before you provide your application information, make sure the Home Mortgage Loan Officer agrees to provide you with an actual Rate Lock confirmation via email or fax on the same day you apply for your loan. When you receive the Rate Lock confirmation, check it and make sure you are Locked-In for the number of required days (30, 45 or 60), with the correct Loan Type (30 Year Fixed, 15 Year Fixed, etc.), with the correct Total Points quoted. It's normal for a lender to require you to apply over the phone before they will Lock-In your Home Mortgage Rate.

TIP#8: Never Float The Rate

If the Mortgage Loan Officer thinks you might be inclined to FLOAT your Rate and Points, he may say, "I think the rates are going to be coming down, so you might want to FLOAT". Remember this, never FLOAT your Home Mortgage Rate. Never. Always Lock-In the Rate and Points. If you FLOAT, and the Discount Points for Home Mortgage Rates drop, you will only realize the benefit of a small part of that drop in the Points, if any at all. The Home Mortgage Loan Officer will keep the rest of the savings as a fat commission.

Here's how they increase their commission when you FLOAT. Originally, the lender quoted 4.875% with 1.00 Total Point when you applied for your loan. Then 45 days later you called to Lock-In. Keep in mind that over the 45 day period that you were FLOATING, the actual Points for 4.875% dropped to.250 Total Points. So you should have saved.75 Total Points on your 4.875% rate. Right? No! First, you don't know if his company's points have dropped or by how much they might have dropped. So, instead of giving you 4.875% for.250 Total Points, the Home Mortgage Loan Officer tells you his rates only dropped a little bit. He says you can Lock-In 4.875% for.75 Total Points. You are happy because it is.25 lower than what it was when you applied for your loan, but the Home Mortgage Loan Officer is ecstatic because he keeps half of the "overage" you paid. That overage is.50 points and he splits this with his company. If the mortgage amount was $400,000, he just earned.25% which is an additional $1,000 commission. That's not bad for a five minute phone conversation.

If you FLOAT and the Discount Points for Mortgage Rates increase, you will pay for the increase. FLOATING is a LOSE/LOSE proposition for you and a WIN/WIN for the Home Mortgage Loan Officer.

Some companies quote very low rates and attract lots of applications, but they don't let you Lock-In until 15 Days prior to loan closing. If you apply for a Mortgage through a company with that policy, you will get screwed. When it's time to Lock-In your Mortgage Rate, you will pay an "overage" that will go straight to the Mortgage Loan Officers pocket. You will either pay more points for the rate you requested at the time of application or you will get a higher rate. Either way, you will get screwed and the Loan Officer will get a fat overage added to his commission.

Tip#9: Get a Final Good Faith Estimate Several Days Before Loan Closing

Get a copy of the Final Good Faith Estimate at least a few days before the scheduled closing day. Check the Mortgage Rate, Points, Fees and Monthly Mortgage Insurance Premium (if applicable). Make sure you are getting exactly what you bargained for. Ask questions if you don't understand something. Demand that previously undisclosed fees be removed from the Final Good Faith Estimate. Make sure you get a revised estimate if the Mortgage Loan Officer verbally agrees to make changes.

The day of loan closing is the wrong time to haggle over discrepancies.

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Houston Mortgage Rates

A mortgage rates vary according to the type and the duration of the loan. There are three types of mortgage rates:

1. Adjustable Mortgage Rate

2. Fixed Interest Rate

3. Variable Interest Rate

A mortgage with an adjustable interest rate takes into consideration that an interest rate may change (usually in response to changes in the Treasury bill rate or prime rate. The purpose of the interest rate adjustment is primarily to bring the interest rate on the mortgage in line with market rates. The mortgage holder is protected by a maximum interest rate (called a ceiling) that might be reset annually. ARMs (Adjustable Mortgage Rates) usually start with better rates than fixed rate mortgages, in order to compensate the borrower for the additional risk that future interest rate fluctuations will create.

A fixed interest rate mortgage has an interest rate that will not change, and a variable interest rate moves up and down based on the changes of an underlying interest rate index.

There are numerous Houston based mortgage companies willing to present a ready report of mortgage rate calculator. These companies offer refinancing that involves obtaining a new mortgage loan on a property already owned - often to replace existing loans on the property. When the mortgage rates are low, it is a good time to refinance. Refinancing can save you money on your monthly mortgage payments. These companies also offer lock-in rates, or rate lock option that ensures the borrower a commitment to a specified mortgage rate, including not only the interest rate but also its discount/origination points.

Houston Mortgages provides detailed information about Houston mortgages, Houston mortgage companies, Houston mortgage brokers, Houston mortgage lenders and more. Houston Mortgages is the sister site of Atlanta Interest Only Mortgages.

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Fixed Rate Mortgage - Past, Present And Current Market Status

Mortgage loans and fixed rate mortgage history:-

The fixed rate mortgage can be understood as a type of mortgage for which the interest rate has been fixed, or made constant, for the entire length of the mortgage term. Simply, it a mortgage loan with a constant interest rate, which does not change over the entire tenure of the loan. Mortgage loans are traditional types of loans, and have been in existence since centuries. In the past, moneylenders and lords (Europe 16th to 18th century) offered low mortgage rate refinance to needy people, often the pheasants and laborers. However, the middle class families too borrowed money to satisfy their financial needs, and later repaid the amount. In such cases, the lender generally decided the final fixed interest mortgage rate to be charged for the credit amount lent. The rate of interest was more or less standard, and did not change, but it was at the discretion of the moneylender to decide and fix the net chargeable home mortgage loan amount, since there was no controlling authority which decided which moneylender should charge what interest rate, and what kind of benefits the debtors should avail from the creditor, apart from the loan facility. So, to summarize the mortgage loans scenario of the past, the loan procedure and working was not standardized or streamlined. There was little or no authority to question the creditor on fair practice or ethical trade related issues. The rule was quite simple. The moneylender was rich and had surplus money, and was ready to offer some amount at a particular rate of interest. It was for the borrower to decide how badly the credit facility was needed, and whether it was possible to accept the terms and conditions. If yes, the lender would give the money, and the borrower repaid the home mortgage refinance amount as per convenience.

Mortgage and fixed rate mortgage status now:-

Things are different now. Democracies and republics play the part of deciding how fixed rate mortgage and credit finances should be lent, and recovered. And since the governments are composed of common people, financial market has been greatly influenced by how creditors should lend their money, and what kind of protection the debtor should have while paying back the money borrowed. There are regulations in place, along with checks and counter checks, which balance the market economy, and ascertain that creditors do not harass their debtors, and also help the lenders to recover their capital in case the debtors fail to redeem. It has to be a two way street, a path which can be used by both the creditor as well as the debtor, in a harmonious manner?

Mortgage and fixed rate mortgage current market conditions:-

As far as the current mortgage indices are concerned, mortgage rates are indicating yet another strong move higher this week. This is owing to the focus amongst bond investors, who have strong concerns regarding the budget deficits and inflation. Even with the prevailing market conditions, mortgage rates still remain well below the 6 percent mark. The rates do not pose an impediment to deserving borrowers. The Federal Reserve currently has a $1 trillion deficit in terms of outstanding mortgage payments, and if this deficit is catered to, it is possible to bring the mortgage rates down. No further announcements are likely to take place before June, this year, by the Federal Open Market Committee meeting. Mortgage rates sharply increased last week, indicating that the average 30-year fixed mortgage rate increased up to 5.65 percent. As per the national survey, the average 30-year fixed mortgage is associated with an average of 0.44 discounts, as compared to its origination points. The average 15-year fixed rate mortgage rose to 5.06 percent, and the average jumbo 30-year fixed rate rebounded back to 6.68 percent. As far as the average adjustable rate mortgages are concerned, the rate decreased to 5.01 percent while the 5-year ARM jumped to 5.20 percent. Everything said and done, the mortgage rates still remain significantly lower as compared to what they were a year ago. At this time last year, the average 30-year fixed mortgage rate was availed at 6.52 percent, indicating that a $200,000 loan would ideally carry a monthly payment of $1,266.77. With the average rate remaining stable at 5.65 percent, the monthly payment for the same loan amount would be $1,154.47, suggesting a savings of $112. 30 per month.

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Choosing the Right Mortgage - Basic Mortgage Terms and Features

Choosing the Right Mortgage – Mortgage Basics

There is an astounding range of commercially available mortgage products, which makes choosing the right mortgage increasingly difficult without a firm grasp of mortgage basics. Here we try to give the consumer struggling to understand the basics of what a mortgage is, how it operates, and what features are right for him or her, the basic terms and distinctions that will allow the consumer facing an all-important mortgage decision – perhaps for the first time – to begin to choose the right mortgage from the thousands of mortgage products available on the market. But a word of caution – there is an incredible range of mortgage products commercially available. Before making a final decision on which mortgage is right for you, it would only be prudent to consult with an experienced and knowledgeable mortgage broker.

What Is a Mortgage?

A mortgage is a loan – but a loan that is secured, in this instance, against a home and/or piece of land. The person who borrows the money to buy a house is the mortgagor and the person, company or bank etc. who lends the money is the mortgagee. In most instances, the person buying the house will be required to pay some amount, perhaps as little as 5 per cent, as a down payment on the house or property. A mortgage from a commercial or private lender is secured to pay the balance of the purchase price. The mortgagee/lender provides the balance of the money to buy the house on the ‘closing date’ (i.e., the day the deal for the house is completed and the property ownership changes) and the mortgagor/purchaser pays back the money borrowed to purchase the house over time, usually over a number of years.

Key Mortgage Terms & Concepts

Amortization Period – A mortgage is written based on an understanding that the mortgagor/borrower will pay back the money borrowed over a number of years, rather than months. When purchasing a home that is typically worth several times what the purchaser earns in a year, it is understood that a the number of years will be needed to fully pay off the mortgage. The ‘amortization period” is the number of years that it will take to pay off the mortgage in full under the terms of the mortgage that is agreed to. The usual amortization period is 25 years, although shorter and longer amortization periods are available.

The amortization period sets out how long it will take to pay off the mortgage in monthly payments. Monthly payments consist of two parts – one part goes towards paying the ‘principal’ (the amount of money borrowed) and other part goes towards paying the ‘interest’ (the fee charged for borrowing the money.) The longer it takes to pay back the principal – i.e., the longer the amortization period – the greater the amount of interest that will be paid over the life of the mortgage.

Term – A mortgage agreement will not typically be for the full length of the amortization period. It is too difficult for either party – mortgagor and mortgagee – to foresee all the changes in financial circumstances over such an extended period. Accordingly, the parties – mortgagor/borrower and mortgagee/lender – will agree to a mortgage covering a specific number of years of the mortgage – e.g., 5 years. When the term of the mortgage expires the mortgagee is paid in full for the money that was borrowed to purchase the home. Typically, since it is anticipated that the mortgage will be paid off over the length of the amortization period, at the end of the term the mortgagor will have to negotiate a new mortgage – either with the initial mortgagee/lender or a new mortgagee. This process of ‘refinancing’ is normal, yet is an excellent way for prudent borrowers to re-examine their financial circumstances – for example, to see if their circumstances have changed so that they can shorten the amortization period and pay their mortgage off more quickly, thereby cutting down on the total interest they will pay in purchasing their home.

Fixed-Rate vs. Variable-Rate Mortgages – In a fixed-rate mortgage, the same interest rate is charged throughout the entire mortgage term. In a variable-rate mortgage the interest rate will change based on changes in interest rates that are being charged in the market.

Since interest rates do change based on the financial markets, risk is being assigned and the mortgage rates for both fixed-rate and variable-rate mortgages will reflect who is taking the risks – the mortgagor/borrower or the mortgagee/lender. When mortgage rates are relatively high it is the borrower who takes the risk that interest rates will not fall lower than the rate he or she agrees to for a fixed-rate mortgage. So when mortgage rates are relatively high, mortgagee/lenders will usually be willing to offer fixed-rate mortgages for a lower interest rate than the current interest rate for a variable-rate mortgage. The opposite is, of course, true. When mortgage rates are relatively low – as they are now – the mortgage/lender assumes the risk that interest rates will not go up. Since there is always the risk that rates will go up, a fixed-rate mortgage will have a slightly higher interest rate than a variable-rate mortgage when interest rates are relatively low. (The advantage of a fixed-rate mortgage is, of course, that the mortgagee will always know the cost of his or her mortgage payments over the term of the mortgage.)

Open Mortgages vs. Closed Mortgage – With an open mortgage some or all of the balance of the mortgage can be repaid during the term of the mortgage without a financial penalty. This is particularly advantageous, if the home purchaser has to move for employment or other reasons and if one’s financial circumstances change. Under a closed mortgage, no extra payments or changes in the mortgage can be made before the end of the mortgage term without a penalty being charged. Such penalties can be onerous for the homeowner who is forced by circumstances, such as a change of job, to relocate before the term of the mortgage expires.

Open mortgages can also prove to be very advantageous for the prudent homeowner who is able to make periodic payments directly to the principal owing under the mortgage. Each mortgage payment is split between interest costs and money that goes towards paying off the principal of the loan. If the borrower makes periodic payments over and above the regular mortgage payments that are required (the amounts and timing of which are usually set out in the mortgage itself), these payments directly reduce the amount owing under the mortgage. Doing so effectively reduces the amortization period of the mortgage, since in every subsequent mortgage payment more money will be going to pay off the principal of the mortgage and less money will be going towards the interest costs.

The Importance of Mortgage Advice

While this covers some of the mortgage basics that the consumer will need to choose the right mortgage product, it is important to note that there are quite literally thousands of mortgage products to choose from – each with its own intricacies and detailed terms. Accordingly, the prudent mortgage shopper should consult with someone with advanced expertise in the products and range of choices that are available on the market, given the borrower’s circumstances. An accredited mortgage broker will have the expertise and knowledge to assist the borrower in choosing the right mortgage for his or her situation. Moreover, since an accredited mortgage broker typically receives his or her fee from the lender, a mortgage broker with expertise and knowledge of the thousands of mortgages that are commercially available can assist the borrower in understanding and choosing the right mortgage from the thousands that are available at no cost to the borrower.

Tag : mortgage,mortgage rates,mortgage refinance,mortgage loan,bad credit mortgage

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Lowest Mortgage Rates UK – Lowering The Cost Of Mortgage

Mortgage is the most widespread industry that offered to loan borrowers with real estate as collateral. Mortgage has so many innovations and opportunities that a loan borrower can exploit them for their own benefit. You must have heard and read it elsewhere that mortgage rates are at an all time low. That is true. With growing competition in the mortgage industry getting lowest rates for mortgage in UK is not that difficult.

Yes that is true, but how does one find lowest mortgage rates in UK. Many borrowers are practically clueless the criteria to decide on whether the mortgage rates are lowest or not. When you are looking for lowest mortgage rates in UK, you will see that there is not any one single rate. There is a list of rates. And when you go to different loan lenders for rates, they will give to you several mortgage rates list, sometimes identical sometimes different. “What is going on”? – You think in your mind. Is there any thing as lowest mortgage rates in UK? Yes, there is.

You will come across this message everywhere – ‘go look around lowest mortgage rates’. Look around how? – nobody tells you that. It is like standing on the start line not knowing this way you have to run. Calling loan lenders and asking for lowest interest will be practically useless. Also calling for lowest mortgage rates at different days will give you different rates for mortgage rates are changing everyday.

Who is responsible for getting you lowest rate for your mortgage in UK? Economy? President? Government? Inflation? Discard all the high words! It is you and you are one of the most fundamental factor responsible for finding lowest interest rate on your mortgage. With mortgage borrowers absolutely flooding the market place, mortgage lenders are lowering the mortgage rates to attract more and more customers. How can one attract customers for mortgage? By offering lowest interest rates.

However, it is not that easy. Every homeowner wants lowest interest rates for its mortgage in UK. Lowest rates on mortgage in UK are subject to a borrower’s personal financial condition. Therefore, different mortgage borrowers will have different lowest rate for mortgage. One way to figure it out is to apply for mortgage quotes at different loan lenders. But are these quotes really consistent keeping in mind the fact that mortgage rates are continually changing. Most loan lenders will give you a correct quote for mortgage. A mortgage borrower looking for lowest rate should use APR to compare rates. APR will enable you to know true interest rates on mortgage including the interest, discounts, mortgage insurance and other related fees. This will enable you to get a true quote without any hidden fee which the lender might be concealing behind the lowest mortgage rate claim.

Prequalification is a way of discovering whether for mortgage will also enable you to know whether you are getting lowest interest rates or not. A lender will see your present current income, debt and basic credit history situation in order to qualify you for a maximum mortgage amount. When you find lowest interest rate for mortgage in UK, you can lock in your interest rate. A lock means the lender will lock in the lowest interest rate and points for a specific period of time that is usually the time during which the loan application is processed.

Lowest interest rates in UK are possible if you have good credit history. A good credit history has innumerable benefits in the loan market. Also lowest interest rates are possible adjustable rate mortgage. Adjustable interest rate mortgage in UK have interest rates lower than traditional mortgage. Also loan term of a mortgage should be lesser. A 15 year mortgage will mean lower rate of interest than a 30 year mortgage. A shorter loan term will always save money.

No other single factor has so much effect on your mortgage as mortgage rates. Getting a mortgage in UK at lowest rates will mean that you have agreed to all those who asked you to get the “best mortgage deal”. A little decrease in interest rates would mean big in terms of savings. There is loads of information available on internet to know how the market is currently fairing. Don’t settle for the first mortgage rate you stumble upon because they seem lowest. Go to different mortgage lenders. And then decide. Lowest rate for mortgage is not the only factor to look out while mortgaging for but it certainly is one of the deciding factors.

So while you are jumping frantically from one site to another in order to get lowest interest rate, you forget that it will need some patience and hard work. Like all good things it won’t come easily. Lowest rates for mortgage in UK won’t be served on a platter. No way. If you had enjoyed doing homework in school, looking for lowest interest rate won’t be a problem. Look around, study research, read and you will find mortgage rates not only lowest but surpassing your own mortgage rate arithmetic.

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3 Benefits Of A Fixed-Rate Mortgage You Won't Like To Pass Up On

Will you be purchasing a home very soon? There are a variety of other ways to finance it in today's market. Most people would probably choose to buy their houses with cash, since it's one of the simplest ways to purchase a house, but this often isn't a realistic option. Mortgages are much more realistic, though. They come in so many different forms that today's home buyer is certain to find one which suits their requirements.

You can consider a fixed-rate mortgage, since it's one of the most popular options from which to choose. This is a mortgage where monthly payments stay static over time. A certain period that generally ranges from 10 to 50 years is how long this mortgage can be repaid. A 30 year amortization period is the most common option.

You will find that among the main advantages to choosing a fixed-rate mortgage is how secure it is. You will find that, as opposed to alternatives such as adjustable-rate mortgage, a fixed-rate mortgage will allow you to pay the same fee each month throughout the loan's term. One of the other alternatives, known as an adjustable-rate mortgage, usually allows for reduced monthly payments at the start that will end up ballooning over time. Ultimately the interest rate will increase, possibly to an amount which is infeasible for the buyer, in spite of the initial payments being lower on adjustable-rate mortgages. Those who choose fixed-rate mortgages will never have to stress about this.

Next, fixed-rate mortgage offer security. Even if the interest rate in the current market rises, the amount you will have to pay from month-to-month on your mortgage will stay the same. You may also make the choice to refinance with a lower interest rate at any time if the interest rate decreases. As a buyer, this ensures that you get the best of all possible circumstances. Other mortgage alternatives will not provide this much security.

Lastly, the flexibility of a fixed-rate mortgage is incomparable. While additional principal payments are never required, buyers can choose to pay extra to reduce the total duration of their loan. Adding only one extra monthly payment a year adjusts a 30 year amortization period down to about 26 years, saving you 4 years off your entire loan. The amortization period decreases to approximately 22 years if you are going to pay half your monthly mortgage bi-weekly.

Fixed-rate mortgages are therefore a safe and sensible option for several house buyers. If you're searching for a mortgage that continues to be secure all through its entire term and offers a considerable amount of guarantee and flexibility a fixed-rate mortgage might just be your best bet.

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Understanding Fixed Rate Mortgage

No matter if you are trying to mortgage your home or trying to buy a home, you must know in the market today the two most common mortgage rates known as a Fixed Rate Mortgage (FRM) and the Variable or Adjustable Rate Mortgage (ARM).

There are many benefits and disadvantages to consider when deciding if a fixed rate mortgage is right for you. It is important to look at all options when it comes to something as important as getting a mortgage for your home.

A fixed rate home mortgage loan (FRM) means that the interest rate you get upon loan approval is the interest you maintain for the life of the loan. The benefit is that the rates and payments remain constant. There won't be any surprises even if inflation rises out of control and mortgage rates head to 20%. The life of the loan is refereed to as a mortgage term. A mortgage can range anywhere from a six months loan to 30 years. The 30-year fixed rate mortgage is the most common terms.

In general, fixed rate mortgages are a safer way for first time home buyers to get a mortgage, since there is greater stability and less risk involved. It is easy to budget and regulate your monthly expenses when you know exactly what your interest will be. Generally, FRMs are more expensive to compensate for the lesser risk and greater comfort involved. FRMs are also less risky since you always have the option to refinance in case interest rates drop uncontrollably. If the current interest rates are low, a fixed rate mortgage will be a good choice as you will be assured of locking in at low interest all throughout your loan term.

There are also a few things to consider when deciding to choose a fixed rate mortgage. To take advantage of decreasing rates, mortgage holder would have to refinance. This means that you must spend a few thousand dollars in closing costs. Fixed rate mortgage can be too expensive for some borrowers, especially if the current rates are high, because there is no early on payment and rate break like there is with adjustable rate mortgages.

Which type of mortgage is better for you depends on your ability to handle the interest fluctuations. A fixed rate mortgage is right for you if you like the stability of a fixed payment over a predetermined period of time. You can apply for any term mortgage you feel you want, for example, a five year fixed table can be created for you with a fixed rate mortgage. This means that for five years you will repay the loan with a fixed interest rate table.

About The Author:
Liza has written various articles about insurance issues, including homeowners insurance, and home mortgage.

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Basic First Time Buyer Mortgage Transactions

In order to get a suitable first time buyer mortgage, you need to explore different mortgage options. But before that, you will need to know about how lenders review your application and decide whether or not to approve your request for a mortgage.

Before considering your application, the lenders will evaluate your ability to pay back a mortgage. This is done on the basis of your total monthly income and total monthly debt. In general, a monthly income to debt ratio of 36 to 40% is generally considered acceptable. You can also expect them to check your willingness to pay by checking your credit rating. It goes without saying that if your credit score is low or the higher your income to debt ratio, your chances of getting approved for a conventional mortgage is less. In such cases, if you are grated a loan the interest rates will be higher with less attractive terms and conditions to cover the higher risk perceived by the lender.

However, if the lender is satisfied with your financial credentials, you can confidently expect to get loan with various benefits such as lower rate of interest, smaller monthly installments, smaller monthly outgoings, longer repayment duration, flexible repayment options, lower fees and penalties, among others. In case of an adverse credit record you neednt worry much because there are many creditors who provide mortgage to bad credit borrowers. Bad credit mortgages are especially designed to help people having a poor credit record.

There are a number of popular first time buyer mortgage options available in the market. The first among them is fixed rate mortgage which has a fixed interest rate for a specific period of time for a period of up to one to five years and after this period the interest returns to the lenders standard rate. Fixed rate mortgages allow you to successfully plan your finances, as you know the mortgage repayment won't increase for the defined fixed rate period. However, when interest rates fall you do not benefit from reduced payments.

Another option is variable interest rate that goes up or down as per market flexibility in the rates. So, first time home buyers may prefer to keep away from this option because if they cannot adjust with an increase in rates they may end up having trouble making payments. Other common options are tracker mortgage, discounted mortgage, and capped rate mortgage. The tracker mortgage follows the interest base rates. In most cases your mortgage interest rates is set at a certain percentage above the base rates. The main advantage is that when the base rate falls then so do your repayments. And the reverse will also happen when the base rates rise.

Discounted mortgages work in a similar way to tracker mortgages in that they are variable loans. Unlike a tracker, a discounted mortgage doesn't follow the base rate. Instead, there is a reduction in the lender's standard variable rate for an agreed length of time. Your repayments will fall when the interest rate falls and they tend to be some of the cheapest first time mortgages available. Capped Rate Mortgage is guaranteed not to raise the interest rate above a certain percentage, normally for one to two years, after which the interest rate returns to a fixed or variable rate.

Other versions are repayment mortgage and interest only mortgages. In the former, you will see each monthly payment go towards paying off the underlying debt, as well as the interest on the loan. At the end of the term, the mortgage is cleared. The latter, on the other hand, expect you to pay off the loan's interest, not the loan itself. At the end of the mortgage term, however, you are expected to repay the capital.

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Fixed Rate Mortgage and Variable Rate Mortgages

Increasingly popular Variable Rate Mortgages over the last several years helps pay down your mortgage faster. Variable Rate Mortgages are becoming increasing popular among mortgage hunters. This mortgage caters to the higher risk threshold customers and hope that the bank rate will remain stable.

The main differences between Fixed Rate mortgage and Variable Rate Mortgages are how the increase rates are set. Fixed Rate mortgages have a set interest rate, and Variable Rate mortgages are based on the Bank Rate. The chartered banks add the premium to the bank rate to create the prime rate and this helps lenders price their Variable Rate Mortgage products. The fixed rates mortgage is based on the bond market and is controlled. They fluctuate with political, corporate and economic conditions. This will change both mortgage rates in a round about way. So time is very important to your mortgage hunting and you should be ready for the change in the political controlled world when it comes to your mortgage.

The main decision you have to make is how your mortgage fits your lifestyle and your financial household needs. Doing your home work on mortgages is very important. Fixed Rate mortgages can be a more controlled mortgage, but a Variable Rate mortgage can be risky if the market is going through many changes.

Ken and Deidre Bissonette are successful authors and publishers of Mortgage information for you. Making looking for a mortgage easy....123 http://www.mortgage-credit-card.com

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What Is Capped Mortgage

The capped mortgage is basically an adjustable rate mortgage in which the maximum interest rate is set. Any spike of interest rate over the maximum interest rate will not affect the mortgage repayment. The borrower knows the maximum mortgage payment.
When the interest rate takes a dive, the borrower pays a lower monthly mortgage payment or bi-weekly mortgage payment. Using the capped mortgage, the borrower is protected from a spike in interest rate.

This protection on interest rate spike comes with a price. The mortgage lenders will charge a slightly higher interest rate. For example, the current interest rate is 4.5%. The borrower pays 5.0% interest rate.

The main benefit of capped mortgage is peace of mind. The borrower knows exactly how much is the highest mortgage payment. And, the borrower knows that the mortgage payment will not exceed the maximum mortgage payment.

Recently, the mortgage lenders suffered from mortgage meltdown. The interest rate went up high enough that the borrower could not repay the mortgage. There were so many foreclosures. In this instance, the capped mortgage could have been advantageous for the borrower.

The interest rate for capped mortgage is a compromise between the fixed rate and adjustable rate. So, the interest rate will be slightly over the fixed rate.

Annually, the mortgage lenders allow a certain level to pay additional or lump sum amount without paying mortgage penalty. When the borrower pays additional amount or lump sum amount over the certain level to pay off mortgage early, the mortgage lenders charge the mortgage penalty as well.

In most mortgage lenders, the capped mortgage is available mortgage options for buy to let mortgages. The buy to let mortgage is a mortgage in which the borrower purchase the property to rent. The borrower can purchase several property with buy to let mortgages.

Dennis Estrada is a webmaster of mortgage calculators, buy to let mortgages, and bi-weekly mortgage payment website.

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Tags : Mortgage , Capped Mortgage , Capped

You Will Not Allow Your Mortgage To Go Astray In The Absence Of Mortgage Advice

Mortgage advice works on the principle that not every person has enough knowledge to back his mortgage decision with. A few of them do not have time enough to spend on the decision-making. They will try to supplement this lack of knowledge by discussing with friends and relatives, searching relevant topics in magazines and journals, and talking with independent financial advisors. This article intends to provide mortgage advice through special emphasis on certain important topics.

Type of mortgage

There is a long list of mortgages that are available in the UK now. First time buyer mortgages cater to borrowers who are buying house for the first time. Council tenants have a specially designed mortgage for them in the form of council right to buy mortgage. Then there are mortgages depending on the manner in which interest is charged. These are adjustable rate mortgages and fixed rate mortgages. The list goes on endlessly. Mortgage advice is not limited to explaining the terms in detail. Mortgage advice also includes recommending to the borrowers, which out of the several mortgage products will be most suitable for the borrower, given the special circumstances of the borrower. An independent financial advisor explains and suggests products. However, the final decision is to be made by the borrower himself, and he must not be forced into making selection for a particular product.

Mortgage options

Mortgage options include clauses such as prepayment penalty. Prepayment is the payment of mortgage before its due term. Conventionally lenders did not allow premature payment because they would lose on the interest part. Prepayment penalty usually declines after a period of say 5 years. Some lenders accept to amortise the mortgage beforehand. Borrowers must carefully read the terms and conditions on which the mortgage is being entered into. Clauses that allow or disallow prepayment must be discussed with the mortgage provider in detail.

Term of repayment

The term of payment of the mortgage has a two-sided effect. On one hand, it effects the monthly instalment. On the other hand, the interest cost is affected. Therefore, while you can lessen the monthly instalments by extending the term of repayment, you are adding to your interest cost. The term must then be decided accordingly. Interest only mortgages, where only interest is paid during the life of mortgage, has the longest term. Typically, mortgages are available for a period of 30 and 15 years. 15 years term is the best one can get because the rate of interest will be the lowest. The rate of interest increases with an increase in the term of repayment. Mortgage advisors recommend the term for which a borrower must extend repayment after studying the borrowers financial condition. Mortgage advisors also suggest alternative repayment options to further save on the interest.

Fees

You take up a mortgage and are handled a list of fees that you will have to pay as fees to enjoy the loan.

Mortgage advice helps you distinguish between fees that are justifiable and those which are not. Fees in the field of mortgages are referred to as points. Thus, where a fee of 2 points is being charged of a mortgage value of ₤100,000; the actual fees payable will be ₤2000. Paying points is like an investment made for getting a better rate of interest. Thus, a greater point paid will lessen the rate of interest. A typical situation arises when the lender agrees to pay certain points to the borrower if the mortgage is pegged at a higher rate of interest. Borrowers who are cash-short can use this as an opportunity to get cash. In this case, the points will be depicted in negative.

Down payment

Loan providers accept down payment from the borrowers as a sign of credibility. When a borrower has his own money locked in a particular property, there is a lesser chance of his becoming late in payments or not paying altogether. The down payment is calculated by deducting the loan amount from the lower of sale price or increased value of house. Down payment facilitates the borrower to have mortgage at favourable terms. Mortgages are available also to those who cannot pay a down payment. It is difficult to qualify for a mortgage without a down payment because there are strict guidelines on the credit history of the borrowers.

Lock period

Lock period is referred to the time for which the rate of interest is kept stable on a particular rate of interest. Borrowers go for locking the rate of interest in order to insure themselves from the constantly changing rate of interest. When the lender is losing on the current rate of interest that is greater than the rate locked, he needs to be compensated. For this extra points will be repayable. Rate locks makes borrowers lose on a further decline in rate of interest. Mortgage advice will be necessary to decide on the time the rate must be locked, the time for which the lock must be valid, etc.

Requirement of documents

The requirement of documents is for verifying the candidature of the borrower for approval. The demands of lenders vary from the strictest “full documents” to the lenient most “no-docs”. As the requirements for documents go on lessening, the interest rate goes up. For a faster approval of the loans, the borrower must have all documents ready.

Mortgage advice source must be decided by the borrower. While some people are good in imbibing knowledge through books, other will need a face-to-face contact.

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