A Basic Overview Of Home Mortgages
When people decide that it is time to purchase a new home, or if they are thinking of refinancing the one that they currently have, they will probably start by contacting a Nil - mortgage company that they know in their town or city and get a quote on a new mortgage, or refinance, from one of these companies. Unfortunately, if their credit is not up to par, they might have to pay a higher interest rate, or they could be denied altogether based upon their credit rating. For those that can qualify, it helps to know a little bit about home mortgages so that you can make an educated decision on which one you should get. In this article, we will provide a brief overview of home mortgages.
Fixed Rate Mortgages
One of the most popular types of home mortgages is a fixed interest mortgage. These are typically given to those that have exceptional credit, and are very beneficial on a long-term basis. The interest rate that you acquire the loan at will stay the same throughout the duration of the loan itself. If you get a 15 year fixed, or a 30 year fixed, the payment that you make every month will be the same until it is paid off.
Variable Rate Mortgages
Unlike a fixed-rate mortgage, the amount of interest that you pay initially on the loan will be very low. This can make your payments extremely affordable, which is why many people opt for this type of mortgage. The drawback to having this type of loan is that, although the first few years of payments are extremely affordable, after a certain point, the interest rate may increase dramatically. The mortgage fiasco a few years ago was the result of many people getting variable rate mortgages were unable to make their payments, causing many to leave their homes, and some even filed for bankruptcy. Therefore, if you get a variable rate mortgage, understand that it should only be for the short-term, a loan that allows you to make low payments the first few years until you can refinance at a fixed-rate.
Mortgage Protection Insurance
Many people opt for mortgage protection insurance, otherwise known as MPI. If you are ever disabled, or you are laid off from your job, having this type of insurance will allow you to make your payments during the time that you were not able to generate any money. The only caveat with this type of insurance is that the premiums can be exceptionally high. You might be better off to save a couple hundred dollars a month, and earn interest on the money, so that you have an interest-bearing bank account to use as backup during financially difficult times.
Refinancing Options
If you currently have a mortgage, and you would like to find out if you could refinance your home, you might do so for a couple different reasons. Many people refinance so that they can take the equity out of their home and use it to pay for various things including their children's college education, or even for a remodel on their home. Other people refinance to lower their monthly payment on the mortgage, something that is often done by those that have variable interest rate loans. There will be several fees and points that you will have to pay when you do a refinance. However, after doing the numbers, if you are going to save money each and every month on your mortgage payment, it's probably the best decision to make.
There are many other aspects to the mortgage industry that you might want to research, yet with this basic overview of how home mortgages work, you should be able to move in the right direction, and acquire a home mortgage that is not only affordable, but also has a reasonable interest rate.
There are many other aspects to the mortgage industry that you might want to research, yet with this basic overview of how home mortgages work, you should be able to move in the right direction, and acquire a home mortgage that is not only affordable, but also has a reasonable interest rate.