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People focus mostly on the interest rate when looking for the best mortgage. Other than the interest rate, there are some other variables to consider when looking for a mortgage that is ideal for you. One of the variables that you should consider is the length of the mortgage agreement. There are various options available, so you need to have a conversation with your financial planner to know the reasons why you might like to choose a short-term or long-term mortgage. Here are some considerations to bear in mind:
Do you need to make a long-term commitment?
Most financial institutions offer a 30-year fixed term. This term comes with a fixed rate most times. You should note that this rate is sometimes 1 to 2% higher than a fifteen-year term. When you choose a more extended period, the rate will not change for decades which helps with long-term planning.
Paying for stability.
When you go through the rates of any bank, you will discover that the shorter terms usually have lower rates. Therefore, if you can accommodate rate fluctuations and renegotiation more frequently, you could realize considerable long-term savings through a lower monthly premium. If you merely want to have a rate and stick to it, then choose a long-term, fixed-rate mortgage.
Breaking up is difficult.
Some people have been advised to break their current mortgage and start up a new one at a reduced rate. However, you should know that refinancing a mortgage is not free; it comes at a cost. Your current lender may charge you a fee, and you will pay fees, points, and closing costs for the new loan.
The interest rate differential, also known as IRD, is the difference between your real rate and currently available rate of the same mortgage. Different lenders calculate this penalty differently so ask your preferred lender for their early liquidation or mortgage transfer conditions.
Is it worth moving to a lower mortgage rate?
You should be aware that your lender will charge you based on the higher figure between the two calculations. What you need to do is to compare the amount of interest you will pay over the remainder of your present mortgage and what you would pay at a lower rate when you switch. When making your comparison, you should consider the penalty figure. You should base your decision on the outcome of your comparison.
You should consider switching to a lower mortgage rate if the interest savings is more than the penalty charges. However, you must be sure that there is no other fee attached that may wipe out your potential savings.
Talk to your financial planner today to know what mortgage is best for you.
If you’re finding that your finances are a bit tighter these days, you might need to adjust your budget a bit. Have you ever thought about alternatives in helping you to pay your mortgage? There’s a few things that you might be able to do in your home to save a few bucks and be more comfortable with your budget and finances.
Share The Space
This might sound crazy, but it works for many people. If you’re willing to share your living space with others, it could help you to make a dent in your mortgage. This works especially well if you have a home with a separate entrance like an in-law apartment or something similar.
Make Adjustments To Your Expenses
There are many different costs that come along with owning a home. If you reduce some of these expenses, you’ll be able to cut your overall spending. You don’t need to completely adjust your entire way of living to do this. Some ideas:
- Cut the cord on cable and install streaming devices
- Go on a family cell phone plan
- Skip the gym membership
- Use public transportation
- Cook at home instead of eating out
- Use coupons
Put Tax Refunds To Good Use
If you normally get a tax refund, you can apply that money to your mortgage instead of using it to buy something else. You could also adjust your withholdings. This would allow you to get a bit more money in your paycheck each week. You’ll get less of a refund during tax time, but the extra money may help you to pay down bills throughout the year.
Pay More Towards The Principal
To make the most of your hard-earned savings, use your money wisely and pay down the mortgage faster. Just be sure that there’s no penalty for a prepayment of the loan. You can either make an extra loan payment each month or you can pay a bit over what you owe on the mortgage each month. If you pay the mortgage faster, you’ll save potentially thousands of dollars in interest over the life of the loan. You’ll need to check with your mortgage company to see what their process is for paying more towards the principal of the loan. Keep in mind that the first few years‘ worth of your mortgage payments will be going towards interest unless you specify extra payments to go elsewhere.
Whether you’d like a little more of a financial cushion or are just looking to get rid of all those pesky monthly bills, it’s never a bad idea to focus on paying your mortgage down as quickly as possible.
Ready to buy a home? You'll likely need a mortgage to ensure you can afford your dream residence. Lucky for you, many banks and credit unions are happy to help you discover a mortgage that suits you perfectly.
Ultimately, meeting with a mortgage lender may seem stressful at first. But this meeting can serve as a valuable learning opportunity, one that allows you to select a mortgage that is easy to understand and matches your budget.
When you meet with a mortgage lender, here are three of the questions to ask so you can gain the insights you need to make an informed decision:
1. What mortgage options are available?
Most lenders offer a broad range of mortgage options. By doing so, these lenders can help you choose a mortgage that meets or exceeds your expectations.
Fixed-rate mortgages represent some of the most popular options for homebuyers, and perhaps it is easy to understand why. These mortgages lock-in an interest rate for a set period of time and ensure your mortgage payments will stay the same throughout the duration of your mortgage.
Meanwhile, adjustable-rate mortgages may prove to be great choices for many homebuyers as well. These mortgages may feature a lower initial interest rate that rises after several years. However, with an adjustable-rate mortgage, you'll know when your mortgage's interest rate will increase and can plan accordingly.
2. Do I need to get pre-approved for a mortgage?
Pre-approval for a mortgage usually is an excellent idea, and for good reason.
If you get pre-approved for a mortgage, you may be able to enter the homebuying market with a budget in mind. That way, you can pursue houses that fall within a set price range and avoid the risk of overspending on a home.
On the other hand, you don't need to be pre-approved for a mortgage to submit an offer on a home. But with a mortgage in hand, you may be able to gain an advantage over the competition, one that might even lead a home seller to select your offer over others.
3. How long will a mortgage last?
Many mortgages last 15- or 30-years – it all depends on the type of mortgage that you select.
A lender can explain the length associated with various mortgage options and highlight the pros and cons associated with these mortgages.
Moreover, you should ask a lender if there are any prepayment penalties if you pay off your mortgage early. This may help you determine whether a particular mortgage is right for you.
When it comes to finding a lender, don't forget to meet with several banks and credit unions. This will allow you to discover a lender that offers a mortgage with a low interest rate. Plus, it enables you to find a lender that makes you feel comfortable.
If you need assistance in your search for the right lender, be sure to reach out to a real estate agent. This housing market professional can provide details about local lenders and ensure you can accelerate your push to acquire your dream residence.
It’s hard to overstate the importance of credit scores when it comes to buying a home. Along with your down payment, your credit score is a deciding factor of getting approved and securing a low interest rate.
Credit can be complicated. And, if you want to buy a home in the near future, it can seem daunting to try and increase your score while saving for a down payment.
However, it is possible to significantly increase your score in the months leading up to applying for a loan.
In today’s post, we’re going to talk about some ways to give your credit score a quick boost so that you can secure the best rate on your mortgage.
Should I focus on increasing my score or save for a down payment?
If you’re planning on buying a home, you might be faced with a difficult decision: to pay off old debt or to save a larger down payment.
As a general rule, it’s better to pay off smaller loans and debt before taking out larger loans. If you have multiple loans that you’re paying off that are around the same balance, focus on whichever one has the highest interest rate.
If you have low-interest loans that you can easily afford to continue paying while you save, then it’s often worth saving more for a down payment.
Remember that if you are able to save up 20% of your mortgage, you’ll be able to avoid paying PMI (private mortgage insurance). This will save you quite a bit over the span of your loan.
Starting with no credit
If you’ve avoided loans and credit cards thus far in your life but want to save for a home, you might run into the issue of not having a credit history.
To confront this issue, it’s often a good idea to open a credit card that has good rewards and use it for your everyday expenses like groceries. Then, set up the card to auto-pay the balance in full each month to avoid paying interest.
This method allows you to save money (you’d have to buy groceries and gas anyway) while building credit.
Correct credit report errors
Each of the main credit bureaus will have a slightly different method for calculating your credit score. Their information can also vary.
Each year, you’re entitled to one free report from each of the main bureaus. Take advantage of these free reports. They’re different from free credit checks that you can get from websites like Credit Karma because they’re much more detailed.
Go through the report line by line and make sure there aren’t any accounts you don’t recognize. It is not uncommon for people to find out that a scammer or even a family member has taken out a line of credit in their name.
Avoid opening several new accounts
Our final tip for boosting your credit score is to avoid opening up multiple accounts in the 6 months leading up to your mortgage application.
Opening multiple accounts is a red flag to lenders. It can show that you might be in a time of financial hardship and can temporarily lower your score.