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A Guide To Mortgages

Comparing mortgage packages can be one of the most confusing steps in buying a home; how do you know the lender is not taking you to the cleaners? The educated consumer who takes their time to do the homework will get the best deal and leave the marketing pitches behind.

What Is A Mortgage Loan?

A mortgage or a mortgage loan is a line of credit for the purchase, refinancing or improvement of a home. There is a wide variety of loans in the market, but the two main types are fixed rate and adjustable rate mortgages, and you can save thousands of dollars by comparing and negotiating the terms.

Fixed Rate: With this mortgage loan, the interest rate is fixed when the loan is secured, and it remains the same for the life of the loan.

• Advantage: There are no surprises here. The interest rate remains the same for the duration of the mortgage, usually 15, 20 or 30 years.

• Disadvantage: If the market interest rate goes down, you could pay a higher rate.

Adjustable rate mortgages: With this mortgage loan, the interest rate may fluctuate; it can go higher or lower.

• Advantage: Generally, it offers a lower initial rate than the fixed-rate mortgage.

• Disadvantage: After an initial period, the rates fluctuate during the duration of the mortgage. When interest rates rise, they also raise their payments.

A More Affordable Home Loan

If you want to buy a home, the Department of Housing and Urban Development (HUD) offers a program, without much out-of-pocket costs, that in many cases can make the process more affordable. It’s called an FHA loan, managed by The Federal Housing Administration. In contrast to a standard home financing arrangement, the down payments might be as low as 3.5% of the purchase price of a house, and there are less stringent credit requirements. This is a strong argument in favour of FHA loans.

Apart from this, consumers also have more flexibility in the source of a down payment for these government backed loans. A part or all the down payments can be in the form of a grant offered by non-profit organizations or a gift from the member of your family.

However, approval from the US Department of Housing and Urban Development is necessary. Moreover, the absence of any kind of prepayment penalties from these home loans offer a considerable advantage over the traditional forms of home mortgages.

Eligibility is determined by your down payment, if you have enough for closing costs, and a moderate credit score.

Another advantage of an FHA loan is that you can qualify after two years of being discharged from a bankruptcy, unlike most of home financing plans that are generally being offered after seven to ten years. Furthermore, a first-time home buyer is eligible for such home loans only three years after a foreclosure.

Refinancing To Lower Your Monthly Payment

Many consider refinancing a current mortgage loan to lower the interest rates and reduce the monthly mortgage payments. There can be pros and cons to refinancing a mortgage, but a general guideline when considering refinancing is when the current interest rates are at least 3 or more percentage points below what you are currently paying.

If refinancing your mortgage isn’t the right idea, you may consider renegotiating your mortgage at a lower interest rate with your current mortgage lender, usually for a set fee. Renegotiating a mortgage is in theory not refinancing, but an amendment to the current loan. Not all banks agree to this, however, if you can reach this agreement then renegotiating your loan can save you thousands of dollars because you will not pay any closing costs.

The Ins and Outs of Securing your Mortgage Loan

The first step toward getting a loan is determining how much you can really afford. Many potential homebuyers still will not pre-qualify before getting their hearts stolen by that “perfect” home that later becomes unattainable.

Pre-qualifying for a mortgage loan benefits you by helping to understand how much money you can borrow to buy your home. Before the buying process can begin, a lender will examine

• The stability of your income
• Your credit payment history
• Your funds available for upfront costs

Determining the amount, you can afford to pay for your home is an important step. This aspect gives you a clear sign of the price range and the amount of mortgage you can financially manage. Normally your home expense should not exceed 30% of your income before taxes. Potential homebuyers always forget to include considerations for normal household expenses like utilities, food, credit card payments, etc. You will also need to set aside extra money for needed repairs or improvements to the home.

Lastly, when choosing your loan package, you will want to find a loan officer that offers you the best loan terms possible. Shop around and compare offers by asking loan officers from competing lenders to prepare a HUD 1 loan estimate based on your dream home.

Various loan products may have different thresholds, and allow you to borrow different amounts. Keep in mind, never commit to a loan amount that you are not comfortable with; you can always borrow less than the maximum allowed.

7.8% APRC Representative

Representative example: Assumed borrowing of £37,700 over 180 months, with a fixed borrowing rate of 6.4% per annum for the first 36 months, followed by 144 months at the lenders standard variable borrowing rate of 5.9%. There would be 36 monthly instalments of £356.89 followed by 144 instalments of £347.59. Total amount payable £63,021 comprised of; loan amount (£37,700); interest (£21,791); Broker fee (£3000) Lender fee (£530). This would result in an overall cost of 7.8% APRC.

 

Accepted.co.uk is a trading style of Paloma Digital Limited. Paloma Digital Limited is an introducer and we will search our panel of brokers to find the right loan for you. Data Protection Registration Number: Z9868049.

Paloma Digital Limited is authorised and regulated by the Financial Conduct Authority. Firm registration number 769794. See www.fca.org.uk

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

 

7.8% APRC Representative

Representative example: Assumed borrowing of £37,700 over 180 months, with a fixed borrowing rate of 6.4% per annum for the first 36 months, followed by 144 months at the lenders standard variable borrowing rate of 5.9%. There would be 36 monthly instalments of £356.89 followed by 144 instalments of £347.59. Total amount payable £63,021 comprised of; loan amount (£37,700); interest (£21,791); Broker fee (£3000) Lender fee (£530). This would result in an overall cost of 7.8% APRC.

Accepted.co.uk is a trading style of Paloma Digital Limited. Paloma Digital Limited is an introducer and we will search our panel of brokers to find the right loan for you. Data Protection Registration Number: Z9868049.

Paloma Digital Limited is authorised and regulated by the Financial Conduct Authority. Firm registration number 769794. See www.fca.org.uk

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.

Paloma Digital Ltd. Company Registration No. 6934249. Registered Office: Office 229, 275 Deansgate, Manchester M3 4EL.