Things You Should Know About Mortgages

by Brian Nelson on November 27, 2011

Getting a mortgage can be a very confusing process. There is a lot of paperwork to sign, documents to read and procedures to be followed. Although getting a mortgage can be a confusing process, there are three terms that every mortgage holder should know to better understand what he is she is getting into. Basic knowledge about mortgages and what deals are you getting is very important here.

The first term you should understand is, amazingly, the word “term”. Term refers to the length of the mortgage you are taking out – or the amount of time you are making payments. Most of the mortgage deals have a term range of ten to thirty years. Longer term periods have an advantage of lower monthly payments but then you will be paying more in the form of interests. Generally speaking, you should go for the shortest term you can comfortable afford – you’ll save potentially tens of thousands (and in some cases potentially over a hundred thousand) dollars in interest by keeping the length of the mortgage as short as you can.

Next, understand the interest rate on your mortgage and how it is calculated. The interest rate refers to the amount of interest charges you will pay for the money you are borrowing, expressed as a decimal – such as 5.2 for 5.2%. Is it fixed or adjustable? A fixed interest will remain the same where as the variable one changes according to the market conditions. Opting for a adjustable rate of interest may be a risky option, especially for first time home buyers. With adjustable rates, you can end up paying a lot more than you plan for.

Finally, understand what closing costs are and how they are going to affect your purchase price. Sometimes you may have to pay up closing costs from your own pocket. Closing costs consists of things such as appraisals done on the house, attorney fees, notary fee, deed fee – if there is a fee they can think of it usually falls under the term closing costs! And in case you don’t understand anything you can always ask for clarifications and explanations. Some mortgage lenders try to sneak in any fee they can think of to make a few extra dollars profit.

Knowledge about such terms can always help you in making a better decision. As with any product, it is important to shop around for a mortgage when you are considering buying a house. You can benefit from smallest of changes in your favor, it could be in terms of interest rates or easy terms and conditions. It is your money and you should always spend it wisely.

90% mortgages are a good option for you especially if you have little money to invest. Know more about the best mortgage deals by clicking on the links.

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