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Home Mortgage Loans
Written by: Barry Stein
Buying a home remains the great American dream. Home ownership rates
have been exploding in recent years, spurred on by the historically
low interest rates in the home mortgage market. Home prices have
been rising at far faster than inflation, especially in major urban
areas such as San Francisco, San Diego and Chicago. This means that
not only can that home you’ve always wanted put a roof over your
head, but it can provide you with a great investment as well. For
people new to the mortgage market, buying their first home starts
with finding the best home loans.
All potential homeowners should take some time to research home
loans before calling their local realtor. There are a dazzling array
of choices available when it comes to home loans, and finding the
right mortgage for your needs can be difficult. Approach your
upcoming home purchase with the same seriousness you apply to other
major purchases. Your home will most likely be the biggest single
investment you ever make. Take the time at the beginning to educate
yourself about home loans. It will be time well spent.
Home loans are available from a wide variety of sources. These
sources include banks, savings and loan associations, credit unions
and mortgage brokers. Shop around at all of these sources to find
the home loans with the lowest interest rate and lowest costs.
You will also have to decide between fixed rate home loans and
variable rate home loans. Variable rate home loans are often
advertised with extremely low “teaser rates”. These rates are used
by lenders to get your attention and lure you in.
Before signing up for a variable rate mortgage, make sure you find
out what the interest rate cap is. Variable rate home loans are
usually based on an underlying interest rate, like the prime rate.
The interest rate you pay will typically be the prime rate plus or
minus a certain percentage. The variable rate mortgage will have a
cap above which the interest rate cannot rise. Find out what that
cap is, then use a mortgage payment calculator to see what your
monthly mortgage payment will be at that rate. If you cannot afford
the monthly payments at the maximum interest rate, you may not want
to take the mortgage loan. While it is unlikely that interest rates
will rise sufficiently to make the maximum interest rate kick in, it
is always a possibility.
Variable rate home loans can be a good choice if you believe
interest rates are likely to fall. In an environment where interest
rates are steady or rising, they may not be so good a choice. You
may also want to consider a variable rate mortgage if you do not
plan to stay in your home more than five years. For instance, if
your job transfers you every couple of years, you could probably get
away with a variable rate mortgage and take advantage of the lower
interest rate. When you move and sell your home, you will probably
realize a gain due to rising home prices.
On the other hand, fixed rate home loans have a set interest rate
for a set period of time, generally either 15 or 30 years. The
interest rate does not change, therefore you will always know what
your monthly mortgage payment will be. You are protected from rising
interest rates with a fixed rate mortgage. If rates fall
significantly, you can always refinance your mortgage loan to take
advantage of the lower rates.
If you can afford the payments, 15-year home loans can substantially
lower the amount of money you will ultimately pay for your home.
When you run the numbers on a 15-year versus a 30-year home mortgage
loan, you may be surprised at how affordable the 15-year home loan
can be. Your mortgage payment will not double if you go with a
15-year mortgage versus a 30-year. This has to do with the affect of
compound interest. You are paying far less interest in the long run
on a 15-year mortgage.
Whatever type of home loan you decide on, the most important thing
is to take that step which transforms you from a mere renter to a
home owner and builder of equity. There are a great many home loans
out there, but once you find the right one, you will find the
rewards of home ownership well worth the time and effort put forth.
About the Author
Barry Stein is
the owner of aWebBiz.com where he offers cutting-edge tips
on all aspects of business. To find more advice, tools and
resources to help you succeed in your business, visit
Barry's website.
Visit Barry's
website at
http://www.awebbiz.com. |
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