Mortgage Tips

Posted by  on Apr 16, 2009
Mortgage is the conveyance of an interest in property as security for the repayment of money borrowed. If you are interested in this, you should know that the rate adjustment is called the "reset," and on hybrids such as 3/1 and 5/1 ARMs, the rate can jump as much as 5 percentage points. Many borrowers face jumps of three percent to three and a half percent in 2007. For interest-only borrowers, that might mean a doubling of the monthly payment. This is why you should not get caught by surprise by a rate reset. Refinance the loan if it makes sense to do that.

Make sure that you review your mortgage. Homeowners with mortgages should assess their home loans annually, bankers say. Naturally, you would expect lenders to say that. Interest rates change, children grow up, and sometimes you need to fix up the house and move on.

Life events can trigger changes in the way you pay for your house. Every year, ask yourself what is going to happen this year. Do you have a child who is going to college? Are we going to have a child, maybe add a bedroom or have to move? If you plan to move in a couple of years because your family is going to grow, consider getting an adjustable-rate mortgage with a low initial rate that lasts three years. That initial rate probably is lower than the rate you are paying now and the same with the monthly payments.

Before refinancing to save money, make sure you won't get zapped with a prepayment penalty, either when you refinance or sell the house. Calculate the cumulative monthly savings to see if they decisively outweigh the closing costs. If not, keep the current loan.

Ask yourself if your interest rate higher than the market today. Would it make sense to refinance, to take cash out? In addition, make sure to ask yourself how much your house is worth. Ask a real estate agent who is active in your neighborhood. It is a good way to introduce yourself to the person who might someday help you sell the house.

In addition, make sure that you do not pay the minimum on an option ARM. An option ARM is an adjustable-rate mortgage that lets you decide how much you pay each month. You can make a payment that's big enough to pay off the mortgage in fifteen years or in thirty years, or you can pay only the interest, or you can make a minimum payment that doesn't necessarily even cover that month's interest.


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