Get a Mortgage

If you are in the market to buy a home and you need to get a mortgage then there are many different types of mortgages that you will need to choose between. The various mortgage types are discussed briefly in the following text and this should help you decide the type of home loan products that might suit your personal financial position best when you decide to get a mortgage.

Get a Mortgage-15 Year, 30 Year, Biweekly

For many years the  30-year fixed-rate mortgage was the standard home loan product for most prospective American home owners. These days there are many different types of home loans available for home purchase and refinancing ranging from 10 years to as much as 40 years.

Before you decide on a particular type of mortgage or length of home loan you need to look closely at your particular financial numbers. It may be easy for you to get a mortgage but getting the wrong mortgage for you might end up costing you problems down the road and a lot of money.

Get a Mortgage-Benefits of a Shorter Loan Term

By choosing a fixed-rate loan for a 10 or 15 year term you will save a lot of money because you will be paying less interest over the life of the loan.

A $100K loan at 8% interest will have a monthly payment of about $734 without taxes and insurance. Over the 30 years term of the mortgage this adds up to over $264K. Over the term of the mortgage loan you will pay in excess of $164K in interest payments.

However a 15 year loan for the same $100K would carry a monthly mortgage payment of $956 with a total repayment over the life of the loan of $172K. Although the monthly mortgage payments are $200 more for the 15 year mortgage than for the 30 year mortgage, you  would end up saving in excess of $92K in interest payments, a very tidy sum indeed.

Get a Mortgage-Advantages of a 30 Year Mortgage

Even though you will save a large amount of money in interest payments by choosing a 15 year mortgage loan, the larger monthly payment needed to serve the 15 year mortgage can not be met by every person looking to buy a home and get a mortgage.

If your income lever is not high enough you will not be able to meet underwriting requirements to qualify for the loan amount you need to buy the home of your choice on the shorter term mortgage. The lower the monthly payment the more home you can afford to get into, for this reason longer term and lower interest rates are valuable to some home buyers.

A lower monthly payment also provide ease of repayment while still allowing a family to enjoy a good lifestyle, put simply all their available income isn’t going to service a monthly mortgage payment.

And if you are really intent on paying off your home loan early there are a variety of methods that can help you pay off a 30 year loan faster with only a moderately higher monthly payment. A biweekly mortgage payment, which is now offered by many lenders for both new and existing loans basically makes a few extra monthly payments every year cutting down the term of the loan.

Get a Mortgage-Biweekly Mortgage

As the name suggests a biweekly mortgage is paid every two weeks instead of once a month, which over a year makes the equivalent of one extra monthly payment. Although one extra mortgage payment a year may not sound a lot it can really add up over time.

The reality of a biweekly mortgage is that merely by switching from a monthly payment to a biweekly payment you can shorten the term of a 30 year loan by several years and save thousands of dollars in interest payments.

Check with your lender to see if they offer a biweekly payment plan. In many cases, lenders also offer direct payment services that automatically withdraw funds from your bank account, saving you the trouble of having to write and mail a check every two weeks.

Get a Mortgage-Make an Extra Payment

Almost all mortgage lenders will allow you to include extra money in your mortgage which they will apply to the principle balance thereby reducing it and in turn reducing the term of the loan itself. This is especially attractive to homeowners who are worried to take out a 15 year mortgage because they are not sure about their employment, but want to be proactive about paying off their loan early.

If you had a 30 year loan, you might decide to send the equivalent of one or two extra payments a year which would have a dramatic effect on the principle balance, while allowing you the comfort of reverting to your low payment if for some reason cash should become tight.

Remember that with a mortgage loan amortization schedule the reality is that in the early years of the life of the loan your monthly mortgage payment will be mostly applied to interest payments while in the latter years of the life of the mortgage most of your payment will be against the principle balance. With this in mind it is really important when you get a mortgage to make extra payments against the principle balance early in the life of the loan if you want to save on interest and cut the term of the mortgage loan.

 

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