Should I choose fixed or adjustable interest rate mortgage?
What are points?
What is APR (Annual Percentage Rate)?
What are closing costs?
What is PMI (Private Mortgage Insurance)?
Should I refinance?
More Questions?
Should I choose fixed or adjustable interest rate mortgage?
Interest rates are usually expressed as an annual percentage of the amount borrowed. You can choose a mortgage with an interest rate that is fixed for the entire term of the loan or one that changes throughout. A fixed-rate loan gives you the security of knowing that your interest rate will never change during the term of the loan. An adjustable-rate mortgage (called an ARM) has an interest rate that will vary during the life of the loan, with the possibility of both increases and decreases to the interest rate and consequently to your mortgage payments.
What are points?
In the special vocabulary of mortgage lending, "points" are a type of fee that lenders charge. Simply put, a point is a unit of measure that means 1% of the loan payment. So, if you take out a $100,000 loan, one point equals $1,000.
Discount points represent additional money you can pay at closing to the lender to get a lower interest rate on your loan. Usually, for each point on a 30-year loan, your interest rate is reduced by about 1/8th (or .125) of a percentage point.
Tip: Usually, the longer you plan to stay in your home, the more sense it makes to pay discount points.
What is APR (Annual Percentage Rate)?
Annual Percentage Rate (APR) factors interest plus certain closing costs, any points and other finance charges over the term of a loan. The APR must be disclosed to you according to federal Truth-in-Lending laws within three business days of when you apply for a loan, or prior to or at closing for a refinance.
What are closing costs?
On the day you actually buy your new home, in addition to your down payment, the prepaid property tax and homeowners insurance premiums, you'll need cash for various fees associated with the purchase. These expenses are known as closing costs and are paid by both buyers and sellers.
Other closing costs are possible and should be considered when evaluating your financial situation. These may include, but are not limited to:
Title insurance fee
Survey charge
Loan origination fee
Attorney fees or escrow fees
Document preparation fee
What is PMI (Private Mortgage Insurance)?
Private Mortgage Insurance is required when the loan to value ratio exceeds 80% (less the 20% of the borrowed amount used for a down payment). This insurance protects the investor if the borrower defaults on the loan.
Should I refinance?
Your best reason to refinance is to lower your interest rate and consolidate your debt. Of all the reasons to refinance, this is one where you are going to benefit without a doubt. If you are carrying a lot of credit card debt and are finding yourself in over your head, refinancing can get you out of the hole and in position to turn your financial situation around.
Do you have more questions you would like answered? Please contact me.