It’s every adults’ wish to one day own a home. Sadly, many people do not live to achieve this dream for the sole reason of the high cost of acquiring a home. Unless you hit the jackpot in a lottery, you’ll have to save up your money for long periods of time to have enough to buy a house.
For a majority of people all around the globe, mortgage plans are the only option to make the dream of owning a home a reality. Simply put, mortgage is a term used to describe a financial transaction in which you promise to pay back a huge debt. A mortgage should be properly documented in line with the relevant government regulation, a process that is overseen by mortgage brokers.
Mortgage Rates- What Are They and How Are They Charged?
Mortgage rates is a term used to refer to the interest rate charged in a mortgage arrangement. For example, if your mortgage value is $10000 and the interest rate is 12% per annum, you’ll have to pay an interest rate of $1200 every year. Please note that the interest rate charged on a mortgage facility will vary depending on a number of factors. These includes the prevailing market conditions in the housing industry, the current level of economic activity, and the relevant government and industry policies.
It’s common for many people to confuse mortgage rates and annual percentage (APR) – the two are two different terms. While APR is still calculated as a rate, it goes beyond factoring in the annual mortgage interest rate to include other costs like the closing cost and other fees linked to the mortgage plan.
Due to the varying costs of accessing a mortgage plan, it’s obvious that you’ll want to get a low interest rate plan. Mortgage brokers tend to have favoritism to individuals with a strong financial profile. As such, it’s advisable to improve your credit score prior to seeking a home-ownership mortgage. This can be achieved by reducing and/ or clearing other debts and saving up for a considerable down-payment.
For better results in finding a low-cost mortgage plan, you should consult with a mortgage advisor.
Mortgage Points- What are They and What’s Their Significance?
If you have plans to take up a mortgage facility any time in the future, you’ll do better by understanding mortgage points and how they work. In simple terms, mortgage points, also referred to as discount points, is a fee paid by a mortgage holder to the mortgage lender that results in a reduction in the interest rate charged. It presents an aspiring homeowner with an opportunity to reduce the interest rate payable at the end of the year or month.
In actual sense, mortgage points take the form of a down payment with one discount point amounting to 1% of the total value of the mortgage. With the purchase of every point, the interest rate to be paid will be reduced by 0.125%. Purchasing more points will mean that you’ll be reducing the interest rate and lowering the mortgage cost in general.
What’s more, amounts of money paid as discount points are exempted from tax on condition that they property you’re acquiring is your primary home. Seeking expert mortgage advice will enable you know more opportunities for lowering your mortgage cost.
Using Rate Lock to Avoid Unexpected Costs
As stated in this article above, mortgage interest rates do vary with time. For example, if your interest rate at the time of taking a mortgage loan was 12%, you might be required to increase the rate at some point in the future due to changing events in the economy or industry. This will see you meeting costs that you hadn’t planned for. The good news is- you can avoid such a thing by using lock rate.
By paying for a lock rate, your mortgage lender will be compelled to commit to the initial interest rate (that was agreed at the time of taking the mortgage loan). This will see you paying a fixed amount of interest rate irrespective of the changing market forces. However, lock rate will only hold if the loan will be closed within a specified time, usually between 30 to 60 days.
A mortgage broker Southend will help you identify if lock rate is worth taking. This is because while a lock rate will prevent your interest from being increased, it will also stop it from being reduced. As such, it’s only viable to pay lock rate if you expect the interest rate to rise in the future but not the other way around.
Taking up a mortgage loan is a big undertaking and will involve paying large sums of money for long periods of time. Getting to fully understand what you’re getting into is one step in making this home-ownership journey less hectic. This article has shared with you what you need to know with respect to mortgage rates, points, and rate lock for more click here.