Basicwomen's Blog

{October 27, 2010}   Mortgage Tips

Many of us dream of owning our own home but buying a house is an expensive process because of which a home mortgage is required to make this a reality.

A mortgage may be seem very daunting, especially to those who know nothing about it. A mortgage is a loan that you borrow to fund your purchase of a home and any land it is built on. This house and the land are used as guarantee on the loan, which means that if you don’t repay your loan, the lender can take possession of them.

The principal is the amount that you borrow. Interest is the charge that you pay to the lender/bank for making its money available to you. Term is the time period you have to pay off your loan. Choosing the right term for your mortgage is crucial. The longer the term the lesser your installments are. But smaller installments are not on everybody’s mind. Some people prefer paying larger installments because that way they can pay off their loan faster which is better while investing in an appreciating asset.

Consult a good mortgage broker who can offer you at affordable rates. Your local bank may also be of help in this regard. You could later try out other mortgage websites which may offer even better options.

When you buy your first home and you see that 30 year term, it seems like you’ll be paying for your home forever. There are ways to shorten your mortgage term without refinancing.

1. Pay a little extra every month towards your principal. You can usually add a dollar amount that specifically goes towards that and even if you can only afford $20.00, send it in. That is an extra $240.00 towards your principal each year.
2. Make one extra full payment a year. By doing this simple thing, you reduce your loan term by YEARS.
3. Don’t spend money on frivolities. If you have extra cash on hand, invest it in your equity or in home improvements – especially the kitchen and bathrooms which will increase your home’s value.

No matter which mortgage you choose, make sure to ask about prepayment.

If you want to keep your payments low you could go for an interest only payment option. But make sure to buy only a house you can afford, otherwise this mode may backfire.

Most importantly select a good mortgage broker. Getting a mortgage broker these days is not too difficult. But they must make you feel comfortable and relaxed. If you’re able to place complete confidence in their decisions, then you’ve got the right person. Don’t just choose someone as your mortgage broker just whom you  like.

Getting a mortgage loan today is very easy. Get a good broker and let them check some popular websites. Make sure these websites have the Better Business Bureau seal and all of the information security precautions possible.

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