Tips On Refinancing
The mortgage process can be a daunting task. Interest rates, charges, terms, and conditions; It can be a lot to take in all at once. When there is no one on your side, how do you know that the lender isn’t taking advantage of you? Your best defence against being taken advantage of by a mortgage broker or lender is to be well informed. Learn the basics and find out what to look for before singing any contract. Here’s what you need to be able to grasp before signing along the dotted line.
The interest rate you choose is used to determine how your payments are calculated. If you choose a fixed rate of interest, your monthly payment will always stay the same. If you choose a mortgage with a variable interest rate, the payments will change from one year to the next. The problem with a variable interest rate mortgage is that your monthly payment could go through the roof when interest rates go up. If you do decide to go with a variable rate mortgage, find out if there is a cap on how high the rates can go to. Some lenders do provide caps which limit the amount the interest can go up to at one time. Other caps limit the amount the interest rate can go up to over the whole duration of the mortgage. If these options are not available with the company you are dealing with, you might want to reconsider signing with them.
Be aware!
Mortgage lenders sometimes incur a prepayment penalty. This is a fee you must pay if the mortgage is paid off before the end of the term. This penalty is in place to discourage refinancing. If in time you need to sell your home and your mortgage scheme included a prepayment penalty, you will be obliged to pay this penalty to the lender before selling the property. If the prospective lender insists on including a prepayment penalty, shop elsewhere.
Choosing a short term mortgage, like a 10 or 15 year plan, will make your mortgage payment higher but it will be with lower interest rates. Also, with a short term plan, you will build equity in your home much more quickly. If looking for a mortgage with the lowest monthly payments, you will need to choose the longest term plan available.
Remember – ask and you might get!