Homeowners that neglect doing their homework and shopping around for a mortgage end up paying more for refinancing or taking out a 2nd mortgage than is necessary. If you dont understand exactly what to look for as far as terms, interest rates, and fees, how will you know what a good deal looks like? Lenders are out to give you a mortgage with the highest fees and interest rates possible. Before you start applying for loans consider the following mortgage basics. Mortgage Interest Rates The mortgage interest rate you choose when refinancing your mortgage loan is an extremely important factor. Mortgage rates can vary as much as 3-4% or more from one lender to the next. If you have a poor credit rating you can expect a higher interest rate than a homeowner with good credit; however, with a little legwork you may be able to match that interest rate or come close to it. Which Term Length For Your Mortgage? The Term of the mortgage is the length of time you have to repay the loan. Term lengths vary from 1 year to as much as 40 years. By selecting a term with a shorter length such as 15 years your monthly payment will be higher but you will build equity in your home faster. Term lengths of 30 or 40 years offer lower monthly payments; however, you will pay more to interest and less to equity in the early years of the mortgage. Long term loans come with higher interest rates; short term mortgage loans come with lower interest rates. Expect Closing Costs Whenever you refinance your mortgage, or take out a 2nd mortgage, expect to pay fees at closing. These fees will vary from one lender to the next, so consider closing cost as part of your comparison shopping. These costs include administrative fees, title search, surveys, appraisals, inspections, and points. The Annual Percentage Rate your lender is required by law to disclose factors many of these costs together; this can be a useful factor when comparison shopping. |
