Mortgage Reduction and Refinance
Mortgage Reduction and Refinance
When the homeowner approaches the lender and they begin the process of filling out the mortgage loan application, it is a very good idea to know what types of mortgages are available and the advantages and disadvantages for each of them.
Mortgage Brokers.
The Rule covers mortgage brokers who promote loan origination or refinancing transactions as a way for homeowners to avoid foreclosure. Mortgage brokers who don’t promote their services this way generally aren’t covered by the Rule.
Real Estate Agents.
The Rule covers real estate agents who promote their services as a way to help consumers to avoid foreclosure, for example, by getting a lender’s approval
for a short sale. However, the Rule doesn’t cover real estate agents who don’t promote their services this way, and who only provide services to help people in buying or selling homes – like listing homes for sale, showing homes, or finding homes that meet buyers’
needs.
Lenders and servicers.
The Rule doesn’t cover lenders and servicers that offer mortgage assistance relief services in connection with loans they own or service. For example, the Rule wouldn’t apply if a business that services a homeowner’s loan helps the homeowner in modifying the loan to avoid foreclosure.
Accountants and Financial Planners.
The Rule doesn’t cover professionals like accountants or financial planners as long as they don’t claim expressly or by implication that using their services will help a homeowner get a loan modification or other mortgage relief.
Fixed Rate Mortgages
A mortgage in which the interest rate remains the same throughout the entire life of the loan is a fixed rate mortgage. These loans are the most popular ones, representing over 75% of all home loans. They usually come in terms of 30, 15, o 10 years, with the 30-year option being the most popular. While the 30-year option is the most popular, a 15-year builds equity much faster.
The biggest advantage of having a fixed rate is that the homeowner knows exactly when the interest and principal payments will be for the length of the loan. This allows the homeowner to budget easier because they know that the interest rate will never change for the duration of the loan.
Not only are fixed rate mortgages the most popular of home loans, but they are also the most predictable. The rate that is agreed upon in the beginning is the rate that will be charged for the entire life of the note. The homeowner can budget because the monthly payments remain the same throughout the entire length of the loan. When rates are high and the homeowner acquires a fixed rate mortgage, the homeowner is later able to refinance when the rates go down. If the interest rates go down and the homeowner wants to refinance, the closing costs must be paid in order to do so. Some banks wishing to keep a good customer account may wave closing costs. If a buyer buys when rates are low they keep that rate locked in even if the broader interest rate environment rises. However, homebuyers pay a premium for locking in certainty, as the interest rates of fixed rateloans are usually higher than on adjustable rate home loans.
Balloon Mortgages
Balloon mortgages last for a much shorter term and work a lot like a fixed-rate mortgage.
The monthly payments are lower because of a large balloon payment at the end of the loan. The reason why the payments are lower is because it is primarily interest that is being paid monthly. Balloon mortgages are great for responsible borrowers with the intentions of selling the home before the due date of the balloon payment. However, homeowners can run into big trouble if they cannot afford the balloon payment, especially if they are required to refinance the balloon payment through the lender of the original loan.
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