Mortgage Loan: What Do You Need To Know About Mortgage Loan?

KuyaManzano By KuyaManzano, 3rd Feb 2015 | Follow this author | RSS Feed | Short URL http://nut.bz/2ixq8-1w/
Posted in Wikinut>Business>Investment

Getting a loan in a so-so economy doesn’t seem so advisable. Perhaps you already knew of the previous loans that friends and family have availed only to find themselves scrambling for money to pay it back. If you can’t really avoid that situation, you have to explore carefully options that would divert your attention away from short-term loans. Mortgage loans are one option available for you.

Introduction

A mortgage loan is funding secured by property like real estate. The property serves as a guarantee of your paying capacity. Legally binding to prove that you can pay your loan, it gives the lender a legal claim to the property in case you default on your loan. Not many people are willing to go this route because of the risk of losing that piece of land or that car or any piece of property that you submitted. What options are available for us?

Fixed-rate mortgages

For individuals highly-concerned about interest rate risks, they go for fixed-rate mortgages. This is the route to go in case you are worried about the interest rate going larger than the term specified in the loan. It happens that some of us don’t get to pay on time. Not that I encourage you to entertain on that thought, it just so happens that whenever the due date comes around, we realize we’re still broke. What happened to the loan? Wasn’t it supposed to earn profits by now? Exactly. Because this type of mortgage is commonly available for individuals or families that aret trying to buy a home.

Fixed in what terms? It is fixed in years like 25-year fixed-rate mortgage. A home buyer can lock in for a maximum of 5 to 7 years of a 25-year mortgage. And buyers avail of loans during low interest season. Some would rather rely on insider information and properties posted on the bank’s bulletin board for better deals. It may be a loan but options make it easier to come up with a decision.

Principal amount borrowed

This is the amount that you borrowed before adding in the interest. The interest is the rate that you pay in exchange for using the borrowed amount. Highly recommended interest rates are the annual rates. For example if the interest rate comes with the phrase “per annum”, you can divide that number by 12 months. This is how you envision that interest rate on top of the principal amount borrowed. And yes, the option to pay the principal amount plus interest on installment basis within 12 months is possible too. Get that option clarified with the banks that you have already talked to as you will need numbers to calculate the monthly payments.

Variable-rate mortgages

This is the mortgage loan for individuals anticipating declining interest rates. It’s also the loan availed by individuals or families that don’t plan to stay that long in a home that they’d end up buying. I am referring to years, not months, of stay in a house bought with the help of variable-rate mortgages. Besides some folks plan to buy more than 1 home after seeing several houses go on sales at prices way below their market price.

Not everyone is comfortable with the variable-rate mortgage. Anticipating declining interest rates are fine but not always advisable. You know interest rates have a higher probability of going up than going down. Think about higher payments that come when you least expect it. Not cool. Also, if you like to keep your loan parameters simple and easier to compute, this may not be for you.

As opposed to fixed-rate mortgages, variable-rate mortgage loans are paid according to a benchmark set. This benchmark gets set in the middle of negotiating for this type of loan with the bank. This explains why they are also called adjustable-rate mortgage loans. It is also the reason why this type of loan is recommended to accountants with advanced computation skills as it would take some effort to find the significant financial savings that a variable-rate mortgage loan can provide you.

Now that the options available for you are explained, here is to hoping that being blunt about the disadvantages would help you decide which platform works best for you. Remember that bookkeeping skills help a lot in assessing which type of loans would result to lower interest rates and better payment options. Glad to be of help.

Tags

Loan, Loan Broker, Loan Consolidation, Loan Payments, Loans, Mortgage, Mortgage Brokers, Mortgage Loan, Mortgage Loans, Mortgage Payment, Mortgages

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