Understanding Purchase Points, Interest Rates, and Fees on your Mortgage Loan

Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.

Purchase Points

Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.

How do you decide whether you should buy points and if so, how many? Well, the decision should be based on how long you plan on living in your home and what you can afford to pay each month toward your mortgage. If you plan on living in your home for more than five years, it's probably a good idea to purchase points. The longer you live in your home, the more you can save on interest over the life of the loan.

Interest Rate

When you get a mortgage, you are charged an interest rate. This is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.

Mortgage interest rates change constantly, daily, even hourly. If you speak to a lender and are quoted a specific interest rate, that's not to say you'll necessarily get that rate when you close on your loan. Not unless you formally lock-in that rate with the lender. Locking in an interest rate will guarantee you get your loan with a particular interest rate. Lenders will allow you to lock in for 15, 45 or 60 days. But the longer you lock in, the more expensive it will be, since it's more of a risk to lenders.

Fees

There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).

Deciding which mortgage to get may depend on what each lender does because different lenders may charge different amounts. Some may charge lesser closing fees to lure you in, but may charge you a higher interest rate, which means you may pay more in the long run. But everyone has different needs. You may or may not be able to afford to pay more at closing and are willing to pay more over the long term.

Before it comes time to close, do your homework, make sure there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with your mortgage.

Source: http://realestate.yahoo.com

Tips on Remortgaging your current Home Mortgage Loan

Is your current Home Mortgage loan stressful?

Remortgaging can be a very effective means of saving lots of money, but in order to efficiently make use of it you must become aware not only of its advantages but its possible downsides as well.

In order to ensure that remortgaging is indeed worth your while, it's absolutely essential that you fully evaluate any potential savings you'll enjoy against all costs associated with the deal. Listed here are a few things to keep in mind as you're considering your remortgaging options:

• Most lenders offer a wide variety of remortgage products, such as discounts, fixed rates, capped rates, cash-backs and flexible deals, to name a few. If there's anything that you don't understand, ask questions. Be sure that the new lender or advisor explains the pros and cons (and the fine print) of each deal that interests you. Remember, there are no silly questions; it's your hard-earned money that's at stake.

• While it's rarely wise to remortgage directly to a new lender's standard variable rate, if you're initially getting a discount, fixed or capped rate it's likely that you'll have to pay their SVR when the mortgage deal runs out. Therefore – even though SVRs vary over time – comparing a lender's current rate with that charged by other lenders may give you a clue as to how competitive the new lender truly is.

• Many mortgage lenders apply early redemption charges (which are penalty fees charged by lenders to encourage you against remortgaging and also to boost their profits in case you do) to certain deals; for example, they're quite common on fixed rates and discounts. The ERC is usually equivalent to several months' worth of interest on the loan, and can easily run into thousands of pounds. You could be charged an ERC if you pay off your existing loan or remortgage with a new lender within a specified period of time. So before you agree to remortgage, check to ascertain if ERCs apply in both your existing and proposed new deals; and if so, the amounts.

• Be sure to compare arrangement fees. With competition the way it is, many lenders are so keen to attract your business that they've developed special remortgage deals that charge no fees. Therefore, you might not have to pay for the valuation or even the legal fees for your remortgage. But shop carefully; remember to evaluate the entire mortgage deal.

• If you're suffering from the effects of bad credit, you can certainly still find a lender to work with. Remortgaging may offer you two major benefits: lower monthly payments, and the opportunity to consolidate your debts into one lower-interest loan. A bad credit remortgage can also help you to improve your credit rating by clearing your other debts and making timely payments on your new loan. However, keep in mind that although the interest rate of your remortgage deal may be lower, your total interest payments will be greater due to the longer length of the new loan.

• Remember, you're free to remortgage your current home mortgage loan as many times as you like, and as often as you like. But be aware that each time you do, you could be charged ERCs as well as arrangement fees. Nevertheless, you should at least evaluate your mortgage every year or two to determine if remortgaging would save you money. If you find that it will, shop wisely!

Remember to always shop around and never let fear get in between your decision of a home mortgage loan. If you lack the credit qualifications, seek free legal help that will assist you in making the best credit decisions.

Source: http://financialweb.com