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.

Adjustable Rate Mortgage

Adjustable Rate Mortgage

Sometimes people are surprised, by the relatively low interest rate, advertised for adjustable rate mortgages.

Adjustable rate mortgage loans frequently have low interest rates applicable in the short term. However, they are subject to fluctuation as market rates change, because of which they may move upwards or downwards.

Variations in market rates mean that it can be difficult to accurately assess your outgoings, with an adjustable rate mortgage. Some types have limits, beyond which the interest rate cannot increase, but this may be for a specified term after which market rates apply.

Mortgage Interest Rates

It is essential that those who sign up for an adjustable rate mortgage, are aware of their obligations, and choose the right type suited to their personal circumstances. Because they can be risky, and somewhat indeterminate, it is necessary to be sure that you can afford to cover possible interest rate changes.

It is often the case, that initially, adjustable rate mortgages have lower interest rates than fixed rate mortgages. However, it is not as easy to be sure about future trends, as financial markets can turn and work against you. If you understand all the implications you may consider that an adjustable rate mortgage best suits your requirements. Even in these circumstances it is preferable for most prospective homebuyers to discuss their intentions with a qualified mortgage adviser. However, this could be better achieved if applicants first obtained all the information possible.

Does An Adjustable Rate Mortgage Cost Less?

It is possible, and has frequently happened, that an adjustable rate mortgage has worked out cheaper in the long run. But it is not guaranteed to do so, and there is an element of risk that you may or may not be willing to accept. A more significant consideration, is whether you could afford to sustain your obligations, if interest rates rose significantly.

Some people have very secure progressive jobs and incomes to match. Others may have private means, or may belong to better off families that would be prepared to assist in any sort of crises. These are the sorts of considerations that should help you reach a decision in what is the best mortgage to suit your own circumstances.

So before you enter into the commitment of an adjustable rate mortgage seek all the information you can find. There are books and magazines, and of course the Internet is an excellent source to search. Once you feel that you understand the difference between adjustable rate and fixed rate mortgages, you will be in a better position to discuss your requirements with a loan provider. Even then do not get carried away, and seek a second opinion if there is any doubt in your mind, before making what could be one of the most significant financial decisions of your life.

Fixed Rate Mortgages

Fixed Rate Mortgage

As the name suggests, a fixed rate mortgage is an arrangement under which the sum borrowed is repaid over an agreed number of years, at a constant rate of interest, agreed at the time the mortgage loan is negotiated.

Many people prefer fixed rate mortgages because they are not subject to interest rate fluctuations, so they are better able to control their finances. Fixed rate mortgages enable people to plan ahead, without the possibility of rising interest rates creating hardship.

As with other types of mortgage, a fixed rate mortgage may run for differing terms, to suit the applicant. Loan terms of between 15 and 30 years are fairly common, and either could be suitable for particular circumstances. Obviously the monthly repayments would be higher for a fixed rate mortgage over the shorter term, but the total outlay would be considerably less than for a longer term deal. It is really a case of what you can best afford, in consideration of your present and future circumstances.

Fifteen Year Fixed Rate Mortgage

One of the advantages of a shorter term fixed rate mortgage, is that you build up a real stake in your property, quicker than with a longer term arrangement. Therefore, if you chose to sell a property, against which you borrowed $100,000, after a period of 7 years into a 15 year fixed rate mortgage, with an interest rate of 7%, you would have about $66,438 outstanding on the loan. For a 30 year fixed term mortgage, at similar rates the amount outstanding after 7 years would be $91,280, which by any standard is a colossal difference. Of course there may have been significant swings in property values over the 7 year period in question, but that really is another matter.

The major disadvantage with a shorter fixed term mortgage, is the increase in the monthly repayments. For instance, in the example quoted above, the repayments for the shorter period would be around $898 per month, but for the longer term they would reduce to $665. So there really is a lot to consider. It could be that you could afford a smaller home, with a fixed rate mortgage over the shorter term, but family requirements could make such an arrangement impractical.

Thirty Year Fixed Rate Mortgage

A longer fixed term mortgage, is the preferred option for some people, and could give them the opportunity to buy a house that might be beyond their reach with a shorter term arrangement. People have been surprised, by the relatively small amount they have repaid against the sum borrowed, in the early years of a longer fixed term mortgage, but that is the way it works, and it is as well to understand the implications beforehand. That is not to say that longer term arrangements are unsuitable, as there is little doubt that they provide the best opportunity for some prospective home buyers.

Financial management and planning, is no more crucial than when considering the best mortgage, to suit your own particular circumstances. Fortunately, there are many sources of advice including qualified and reputable advisors, useful books, magazines, libraries, and the Internet. Friends and family are frequently a source of sound advice, but even they should be tempered with professional guidance. Buying a home of your own is the ambition of many young people, but their enthusiasm should be matched by a willingness to gather as much information as possible before entering into any sort of contract. That is the best way to reach a successful conclusion, to what may well be the most significant expense, you will ever incur.

Mortgage Interest Rates

Mortgage Interest Rates

Mortgage interest rates move up and down reflecting the state of the economy at large. So when the economy is considered to be healthy, mortgage interest rates are generally lower than when times are more difficult. These mortgage interest rates are used as a control factor by central banks and other financial authorities, to assist in inflating or deflating the economy, as circumstances require.

Mortgage Refinancing

Mortgage refinancing can be advantageous when mortgage interest rates are lowered. Mortgage interest rates can have a significant impact on the finances of borrowers. Therefore, they should be alert to mortgage market fluctuations. A reputable mortgage broker, or financial adviser, should be able to guide you, but there is plenty of information in the financial pages of newspapers and other media to alert you with regard to why and when it is time to consider mortgage refinancing.

There may be a natural tendency to hold back from mortgage refinancing, if mortgage interest rates start rising again. However, if they are still lower than what you are currently being charged, there may be some saving in trying to secure a better deal. It is necessary to keep your eye on the ball, and get into the habit of continuously looking at quoted market interest rates. That is the best way to know when to make a move towards mortgage refinancing, to best protect your personal finances.

There will be charges associated with mortgage refinancing, and it may not be worthwhile proceeding when very small changes occur. If mortgage interest rates become half a percent lower, than what you are already paying, it is certainly worth looking into. Always be prepared to discuss the situation with your financial adviser, who should have a good idea about whether rates will fall even further, in the short term.

Moving or Staying Put?

Another important consideration is how long you intend to remain in your current home. If you intend moving in the near future, there may not be any great advantage in obtaining slightly lower mortgage interest rates. But, through having maintained a constant appraisal of market trends, you will have a greater awareness of what to look for when seeking a mortgage for a new property.

Your house is liable to be the biggest investment you will ever make, so you will be wise to study mortgage interest rates, and the various types of mortgages that they apply to. For example, there are times when an adjustable mortgage interest rate might be preferable to a fixed rate deal. It is only common sense to have as good a grasp of such matters as you can. What is more, it is worth appreciating that if you demonstrate an understanding of mortgage finance to a potential lender, you will receive more respect than the uninitiated.

Let The Buyer Beware

Let The Buyer Beware

Home ownership is a great aspiration. But the old adage 'let the buyer beware', applies as much to the different kinds of mortgages, as to the house of your dreams. It is essential for potential buyers, and particularly inexperienced first time buyers, to get as much information about mortgages as they can. Fortunately most people contemplating buying a home for the first time have relatives or friends who have already done so. They could be in a position to recommend a mortgage broker, or other professional advisor from whom to seek advice.

There are many books and magazine articles on the different kinds of mortgages, and libraries and the Internet are good sources of information. However, there is no substitute for qualified professional advice from trusted sources that have been recommended to you. Remember that mortgage loan providers are in a competitive business. It is possible to shop around for the best mortgage to suit your own circumstances, but unless you are a mortgage professional in your own right, it is imperative that you seek qualified guidance before entering into any commitment – let the buyer beware.

For many people a home mortgage is the biggest financial commitment they will ever enter into.  It would b easy to get carried away by the excitement of the moment but let the buyer beware.  Do not rush into anything.  Sometimes, in a sellers market, there is a requirement to make your mind up quickly but that should never mean being rash.  It is vital to do your homework and develop a good understanding of how the property market works.  There is a case for inexperienced or first time buyers to buy a new build property from a reputable builder some of whom are linked to excellent financial services, and frequently offer ten year or more structural guarantees.

Buying older properties may be more of a gamble.  Old worlde cottages with roses round the door may look very pretty but the ivy up the walls could hide just some of the problems.  If you require a mortgage the lending source will require a survey of sorts before they advance the loan.  However, and particularly where older properties are concerned - let the buyer beware – and arrange an independent survey.  Many older properties are well maintained and offer reasonable value but we have all read horror stories where dream purchases have turned into nightmares.  So, let the buyer beware to ensure that their new house and mortgage is up to their well defined expectations.