Mortgage The Key Points That You Should Know

Mortgage The Key Points That You Should Know



Mortgage: the​ Key Points that you​ Should Know
A mortgage is​ a​ kind of​ an​ agreement made to​ pay the​ money,​ which was loaned,​ to​ a​ person by keeping the​ house as​ collateral .​
Mortgage is​ a​ promise made to​ pay the​ debts by putting it​ in​ writing basically .​
Mortgages have terms and interest rates which are either adjustable or​ fixed.
Mortgage terms:
Mortgages are designed in​ such a​ way that they can be paid in​ installments for a​ certain period .​
The time frame which allows the​ person to​ pay back his mortgage is​ called the​ term .​
The term may be 10 or​ 15 or​ even 30 years .​
The length of​ the​ term determines the​ amount of​ money to​ be paid,​ which is​ actually spread in​ installments.
Mortgage interest rate:
The interest rate depends on​ the​ percentage to​ be paid on​ the​ mortgage loan amount .​
The interest rates vary according to​ the​ credit score of​ the​ person .​
If the​ credit score of​ the​ person is​ very high,​ the​ interest rate and the​ amount of​ monthly installments are lower .​
If the​ credit score is​ lower then the​ interest rates and the​ monthly installment amount are higher .​
Hence a​ good credit score will help getting lower interest rates to​ the​ debtor.
Types of​ mortgages:
Mortgages - Adjustable rate of​ interest
Under this type of​ mortgages,​ the​ interest rate changes from period to​ period according to​ the​ fluctuations of​ the​ market .​
The degree of​ change of​ mortgage interest rate is​ directly associated with the​ index to​ which it​ is​ tied .​
Since index will differ as​ they may be tied to​ a​ foreign bank rate of​ interest in​ certain cases,​ it​ is​ good to​ ask to​ which index the​ adjustable rate of​ interest is​ tied to​ .​
Usually they are fixed for a​ period of​ 1-5 years and then become adjustable.
Mortgages – fixed rate:
The interest rate of​ the​ loan amount is​ fixed in​ the​ case of​ fixed rate mortgage till the​ end of​ the​ term regardless of​ the​ market fluctuations .​
The debtor will never have to​ pay more than the​ fixed interest rate at​ any cost .​
The only means by which a​ fixed rate mortgage can change is​ through Refinancing.
Refinancing:
It is​ a​ process of​ changing the​ existing mortgage terms of​ agreement .​
The debtor can go for refinancing when the​ interest rates are lower so that he can save money qualifying for the​ lower rate of​ interest .​
The length of​ the​ term can also be adjusted to​ be either long or​ short using refinance option .​
Care needs to​ be taken when going for refinancing of​ mortgages as​ it​ entails for new closing costs .​
Fees and closing costs are involved in​ this method.
Appraisal:
The crucial part of​ mortgage is​ the​ appraisal .​
Before going for a​ loan from a​ bank,​ the​ value of​ the​ house must be assessed properly .​
An appraiser can determine how much the​ house is​ worth actually by inspecting the​ features of​ the​ house and by comparing it​ with the​ neighborhood houses .​
If any addition or​ embellishment is​ made to​ the​ house,​ it​ can raise the​ value of​ the​ house,​ but may require to​ appraise the​ new value of​ the​ document.




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