Five Key Mortgage Items you Must Understand
When you apply for a loan, it can be a challenge to differentiate the facts from the jargon. As far as mortgages go, there is lots of false information being peddled as the holy grail. Whether you are interested in a home mortgage for investment purposes, or just as a way of buying a home, you should always do your due diligence. Here are some key details about mortgages that you might be unaware of.
Schemes for First Time Homebuyers are a Myth
Homebuyers are often mislead with regards to Federal Housing Administration loans, or similar payment schemes with small down payments. These schemes are available to buyers who do not have another mortgage, so they seem to be geared towards first time buyers. Actually though, if you have purchased and sold a house and are presently renting you can use the same schemes that new buyers use. If you have enlisted the services of a mortgage broker or lender, who purports to have a scheme only available to first time homebuyers, you might wish to inquire precisely what it involves.
A Payment Window of Thirty Days is Available
Borrowers have to make their repayment by the 15th of each month, otherwise the lender charges them a fee. Different lenders charge different amounts, however it can be up to $100. Most of the time though, the fee is about $50. Of course, it is wise to try and avoid paying unnecessary charges wherever possible. Nonetheless, technically speaking, you are not late if you fail to pay by the 15th. If you pay by the 20th day of the month, you might still incur a lender’s fee, but this will not shown on your credit history. Creditors only regard you as late if you fail to pay by thirty days.
A Foreclosure Takes Four Months
Once a homeowner defaults on four mortgage payments in consecutive months, foreclosure proceedings begin. At this stage, the lender gives them notice that they will move to foreclose the house. Beginning from the initial month that they default on their payment, the borrower is contacted by the lender intermittently in an attempt to restructure or change the loan. Based on the particular lender, after you are over ninety days late, they might only accept the full amount due.
Additional Principal Payments are Effective
If you want to pay your mortgage off as fast as you can, additional principal payments will facilitate this. With a mortgage lasting thirty years, one additional principal payment each year will reduce the mortgage term by approximately seven years. You can shave four years off in this way, if you have a fifteen year mortgage.
Rates of Interest are Important
For bigger loans only. With smaller loans, interest rates do not have much impact. For instance, with a $50,000 loan, there is only a $28.50 per month difference between a 3.5 percent and 4.5 percent rate. In contrast, with a $300,000 loan at the same interest rates, the difference would be $173 per month.
These points can have a significant impact the long term cost of your home and your credit. Be sure to consider them and have a licensed professional advise you as you look to secure a mortgage for any real estate transaction.