Amortization Mortgage

Amortization Mortgage

An amortization mortgage requires the repayment of the amount borrowed by periodic repayments, usually monthly, over an agreed period of time.

Amortization mortgages are frequently used to pay off home loans by equal monthly instalments. There are two parts to an amortization mortgage, namely the principle amount that is the sum of money borrowed, and the interest amount that is the benefit due to the lender for providing the money.

The principle is at its highest at the time the loan is initiated, and in the early years most of the monthly repayments mainly pay off the interest, with a relatively small sum being applied to reduce the amount borrowed. During the latter years the situation reverses and a greater proportion is applied against the principle. Some borrowers have failed to grasp this aspect and have been disappointed, to learn how much of the principle remains, if they have decided to pay off their mortgage, even after an initial period of ten years or so into a thirty year term.

Monthly Repayments

Repayments for an amortization mortgage are frequently based on adjustable interest rates. As rates fluctuate upwards or downwards the monthly repayments are adjusted so that the loan is still repaid within the agreed term. It is possible, at the outset to negotiate to have the interest rate capped, which would mean that if market rates rose steeply, the full extent of the increase would not be charged by the lender. However, that would mean that the period or term of the loan would need to be extended. Some borrowers would prefer to limit their exposure to market trends in this way.

Those who wish to have their mortgage interest capped, should make their intentions clear from the outset, and negotiate what is called a negative amortization mortgage. The way in which interest rates are calculated on adjustable rate mortgages may vary from lender to lender. Adjustments may be made quarterly, bi-annually, annually, or by some loan sources, shortly after prime rates move up or down.

Mortgage Calculators

There are some excellent mortgage calculators on the Internet that are not difficult to use. It is possible to construct tables showing the effect of mortgage repayments year on year. It is a useful exercise because people's circumstances change and they may wish to reconsider their position. For instance there are times when the mortgage market is more competitive, and re-mortgaging may save considerable amounts of money.

Remember always that you should discuss your requirements with a reputable, qualified mortgage adviser. Even prospective borrowers who are proficient at understanding such matters, can gain from a second, or even a third opinion.

Interest Only Mortgage

Interest Only Mortgage

The term interest only mortgage is misleading. Obviously, there is no such thing as an interest only mortgage, because sooner or later you will still have to pay back the loan principal. The thing to remember is that when you get an interest only mortgage, what you’re really getting is an interest-only payment method but somewhere along the line, the actual loan has to be repaid.

You should also bear in mind that the actual benefits of interest only mortgages are frequently overstated. With a standard mortgage, as much as 95% of each dollar paid to the lender may be swallowed up in loan interest. Therefore on a $100,000 standard loan with 7% interest, the total payment could be $700 with the $665 going to interest and only $35 for equity.

A Brief History of Interest Only Mortgages

Interest only mortgages have been available for some considerable time, and the idea behind them was developed from the less rigid and innovative jumbo mortgage markets. Consequently, such mortgages are often a loan type preferred by smart investors and better off clients, who may decide to utilize the principal portion of their payment on their wider investments.

Owing to interest only mortgages being akin to jumbo loans, the difference in monthly payments grows with larger loan amounts. As an example, in a $100,000 interest only mortgage loan, the per month difference could be $100. However, for a loan of $1,000,000 on similar terms, the difference per month jumps to $1,000, a substantial amount that informed investors might usefully employ. The smart investor can maximize his resources using the money he gets from the per month difference growth of an interest only mortgage.

You can see why big-time investors often prefer interest only mortgages. However, it is wise to be aware that there are some considerable risks connected with them, especially when it comes to stocks.

Interest only mortgages have payment periods based on adjustable rate mortgages. However this is not always the case, and interest only mortgage payment schedules are also offered in fixed rate mortgages as well. Interest only mortgages have also gone mainstream so virtually anyone can borrow money with this type of loan.

Temporary Payment Periods

The expiration date of an interest only mortgage payment is usually at the end of a set period. This brings interest only mortgages into line with normal mortgages. You must fully understand that when that expiration date occurs, your payment will then rise to include principal and interest.

Advantages of Interest Only Mortgages

Interest only mortgage payments have some advantages. They can help investors in accumulating assets, because they do not require so much in repayments during the initial years, and the payment differential may be used for a cash investment. Extra cash available may also be used for, retirement money, college money and for other purposes.

As with most money matters, interest only mortgages are a specialized subject, and those unskilled in financial matters are advised to seek the advice of a qualified advisor.

Best Mortgage Rate

Best Mortgage Rate

It is always a good idea to shop around to get the best mortgage rate. A mortgage is similar to any other product and its price and terms may be negotiable. When seeking the best mortgage rate, a comparison of costs is usually involved. Securing the best rate could save you thousands of dollars.

best mortgage rates from mortgage lenders

Obtain information from commercial banks, mortgage companies, building societies, thrift institutions, and credit unions.

In order to secure the best mortgage rates, you need to approach a number of different mortgage lenders as each one may differ in their products. Seeking the best rate for your home loan can also be achieved through a mortgage broker. Brokers are specialists who help you find lending companies with advantageous mortgage rates. The mortgage brokers usually have a wide knowledge of the best mortgage rate options on offer by the leading lenders. There is usually a good range from which you can choose what is best suited to your personal circumstances.

To make sure that you will be getting the best mortgage rate, find out if the lending company you are dealing with has a mortgage broker. Seeking the assistance of a broker may incur additional fees to subtract from your budget, but should save you money in the long run. Mortgage brokers fees may come in a variety of forms, including as an addition to your interest rate, a separate fee, or other ways that must be fully explained to you. With these additional fees, the best deal may appear not to be so great after all, but a good mortgage broker stakes his reputation on doing the best for his clients. Remember that broker’s fees, like mortgage lender fees, are negotiable and be prepared to practice your negotiating skills to secure the best deal you can get.

examine all costs to find best mortgage rates

Making sure that you are getting the best mortgage rate available in the market, is vitally important so you must also obtain information on all the significant costs involved. To obtain the best rate you must be aware of how much of a down payment you can afford. You should also seek to fully understand the full implications of your prospective loan. Obtain the same information from several lending companies. In this way, you can start comparing the costs of each loan and decide which is the most advantageous to you.

Whilst seeking the best mortgage, it is only natural that the first thing you concern yourself with is the rates. Mortgage brokers and mortgage lenders can provide you with a list of current mortgage interest rates so you can decide upon the best mortgage rate for your own circumstances. Be aware that, asking your mortgage lender whether a rate is fixed or adjustable is another significant factor. Bear in mind that adjustable rates, despite their low interest rates, may not be of the most financial benefit to you. Adjustable rate mortgages frequently have low interest rates only in their first year, after which, rates either tend to go up or go down, so include such considerations in your planning.