When it comes to your home mortgage, you may think of it only as another bill due each month. The truth is that your mortgage can provide you with many benefits if you know where to look. You need to start thinking of your mortgage as a viable way to leverage your financial future.
Know Your Interest Rate Options
Mortgage lenders will typically offer two types of interest on their loans. These are adjustable rate mortgages and fixed rate mortgages. It’s generally perceived that adjustable rate mortgages are higher risk than fixed rates. Adjustable tend to start with lower interest initially, then they can change over time with the interest fluctuating with the market. Fixed rate options have one interest rate that the loan is set at for the entire term.
Understand Loan Types
There are three main types of mortgage loans that homeowners utilize. These are FHA, conventional, and special programs. Conventional loans are the most popular type and they are obtained from credit unions and banks. FHA loans are obtained through the Federal Housing Administration and allow for people with low credit scores to obtain mortgages. Lastly, there are various special mortgage programs that are offered via the government and various other groups.
Consider Paying for Points
When it comes to getting the lowest interest rate possible, points are the way to do it. Your mortgage lender will be able to offer you various point levels that will help to decrease the interest rate of your loan. One point is equal to one percent of the loan amount. For example, if your home loan is going to be $200,000, then one point is going to be equal to $2,000. If you pay one point upfront, you’ll be able to reduce your interest rate at a scale according to the lender.
Pick A Feasible Term
Most mortgage lenders offer 15- and 30-year terms. Some lenders may offer terms in between these amounts in special cases. The shorter the loan term, the higher your mortgage payment is going to be. However, the faster your property will be paid off. It’s best to determine what term is feasible for you and go with it.
Getting the best from your mortgage loan starts with understanding it. The above are four major areas that you’ll want to consider when picking out your loan. It’s important to take the time to consider what’s right for you and your financial future before settling on a particular loan.
By Brooke Chaplan
who is a freelance writer and blogger. She lives and works out of her home and residing in Los Lunas, New Mexico. She loves outdoors activities and spends most of her time biking, hiking and gardening.