Mortgages:

What Are The Advantages Of 15- And 30-Year Fixed-Rate Mortgages?

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For both, as we show you in this video, compared with other options,  with fixed rates, housing costs won’t be affected by interest rate changes and inflation.

With A 30-Year Term: In the first 23 years of the loan more interest is paid off than principal meaning larger tax deductions. As inflation and costs of living increase mortgage payments become a smaller part of overall expenses.

With A 15-year Term: Loan is usually made at a lower interest rate. Equity is built faster because early payments pay more principal. And the loan is paid off earlier.

Compare payments, principal and interest totals to make a decision.

Can I Pay Off My Loan Ahead Of Schedule?

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Usually, Yes. Like the guy in the video says, by sending in extra money each month or making an extra payment at the end of the year you can accelerate the process of paying off the loan.

When you send extra money, be sure to indicate that the excess payment is to be applied to the principal and keep records.

Remember that payment applied to loan principal is not tax-deductible. Most lenders allow loan prepayment, but some loans may have prepayment penalties.

Ask your lender for details.

How Large A Down Payment Do I Need?

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There are mortgage options now available that only require a down payment of 5% or less of the purchase price. You’ll see some pictures in this video to help you remember later – the larger the down payment, the less you have to borrow and the more equity you’ll have.

Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan.

When considering the size of your down payment consider that you’ll also need money for closing costs moving expenses, and – possibly – repairs and decorating.

What Factors Affect Mortgage Payments?

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Well, as this story shows, the amount of the down payment the size of the mortgage loan, the interest rate the length of the repayment term and payment schedule will all affect the size of your mortgage payment.
In bullets:

  • down payment
  • loan size
  • interest rate – fixed or adjustable
  • repayment term – how long
  • payment schedule – how often

all affect the size of your payment.

Are There Special Mortgages For First-Time Homebuyers?

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Yes. Like the video shows, lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past.

Lenders may now be able to help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or who have experienced income irregularities.

What Is PMI?

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This video tells you about it all. PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned companies that provide mortgage insurance. They offer both standard and special affordable programs for borrowers.

These companies provide guidelines to lenders that detail the types of loans they will insure. Lenders use these guidelines to determine borrower eligibility.

PMI’s usually have stricter qualifying ratios and larger down payment requirements than the FHA but their premiums are often lower and they insure loans that exceed the FHA limit.

What Is Mortgage Insurance?

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Like the video shows, mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. Like home or auto insurance, mortgage insurance requires payment of a premium, is for protection against loss, and is used in the event of an emergency.

If a borrower can’t repay an insured mortgage loan as agreed, the lender may foreclose on the property and file a claim with the mortgage insurer for some or most of the total losses.

You generally need mortgage insurance only if you plan to make a down payment of less than 20% of the purchase price of the home. The FHA offers several loan programs that may meet your needs.