5 Key Mortgage Differences/Factors

The vast majority of homebuyers, depend, to a variety of degrees, on securing a mortgage, for a percentage of their payment. Even in so – called cash deals, we observe, it generally means the buyer is purchasing, without any mortgage contingency, rather than meaning he is not taking out any loan. This article will attempt to briefly discuss, 5 of the key differences, in the types of mortgages, one might secure, and various considerations. There are differences in terms of type of loan, length, how much one will put down, whether there will be any points involved, and, of course, the rate paid.

1. Term/ Length: The more popular mortgage terms are 15, 20, 30, and 40 year loans. While adjustable or variable term loans, generally adjust at different intervals, the precise length, is often a determining difference, in the monthly expenditure, as well as the overall, total costs. The shorter, the term, the lower the rate, usually charged! On the contrary, longer – terms, translate to slightly higher percentage loans.

2. Fixed or adjustable: When one takes a fixed – rate mortgage, he pays the same interest rate, throughout the term of the loan. On the other hand, adjustable or variable loans, usually have a fixed rate for an introductory period, which change, based on specific indexes, at preset intervals. When interest rates have been high, variable loans are usually popular, because, often, they involve a significantly lower monthly expenditure.

3. Downpayment: We generally consider 20% down, to be the norm, when it comes to the amount, to be paid, by the homeowner, where the rest is mortgaged. However, some loans, such as for non – owner – occupied multi – family homes, or commercial properties, usually require a higher downpayment. There are also, several types of loans, where the homeowner, does not need, to put as much down!

4. Points: We often observe, some loans come with points. A point equals 1% of the amount of the loan, and must be either prepaid, or folded into the loan, adding to the amount of the principal. When one looks at the costs of a loan, you must factor – in, these additional costs and expenses.

5. Rate: Different loans come with differing percentage rates. This will determine the amount of one’s monthly payment.

Since, for most people, their home represents their single – biggest, financial asset, doesn’t it make sense, to better understand your options and costs. The more you know, the better you will be prepared, and ready!

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