Learn All You Can About Mortgage Loan Transactions
When beginning your quest for a home of your own it's a good idea to learn all you
possibly can about mortgage loan transactions and how they apply to you. A mortgage is a promise to pay that typically is carried out over a period of from fifteen to thirty years and involves the largest purchase of most peoples' entire lifetime.Types of Mortgages
It will pay to learn about mortgage loan differences and which might be the best for your particular situation, let's look at some typical types of home mortgages:
- Fixed Rate Mortgages are the most common and safest overall. The borrower agrees to pay the amount owed over a period of from fifteen to thirty years at a set rate of interest. This interest rate will not change over the period of the loan so there are no surprises and the monthly payment will only changed if and when taxes and insurance rates change over the years.
- Adjustable Rate Mortgage or ARM is a mortgage which is easier to qualify for in most instances but is somewhat more unpredictable because as interest rates change, so will the monthly mortgage payment.
- Fifteen years versus thirty year mortgages can mean a huge amount of difference in the amount paid overall for that home. Fifteen year shaves off a considerable amount and if that fifteen year loan is made in biweekly amounts it will further cut down in the amount of interest paid. Learn all you can about mortgage loan transactions before you make that big commitment.
Terms and interest rates
The interest rate currently offered by lenders will make a huge difference in the total amount paid for your home. If rates are low (as they currently are), at around three and a half percent, that will mean that a fifteen year mortgage based on a one hundred thousand dollar home expect to pay approximately one hundred fifty five thousand total over that fifteen year period. Interest would amount to around thirty four thousand dollars, with the rest going toward taxes.
If that same one hundred thousand dollar home and same interest rate applies to a thirty year loan you can expect to pay around seventy two grand just in interest on that one hundred thousand USD loan. What many do not understand about mortgage loan "fine print" is the fact that borrowers pay, and pay dearly for the ability to pay out that amount out over many years.
Borrowing is an expensive business
To look at more realistic figures based on home prices today, lets say that home costs three hundred thousand dollars and you pay nothing down (not likely to happen when you learn something about mortgage loan transactions). Buying that home at the same rate of three and a half percent over a thirty year loan you can expect to pay about six hundred forty three thousand dollars for that three hundred thousand dollar house. Interest would amount to approximately two hundred seventeen thousand. However if that mortgage were changed to a fifteen year and interest kept the same at three and a half percent, you can expect to pay four hundred sixty five thousand dollars or one hundred seventy eight thousand dollars less in interest on that three hundred thousand dollar home. So as you can see, it benefits borrowers greatly when they learn all they can about mortgage loan commitments.
by: Tony Philip