Top Home Mortgage Questions Answered

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Unless you have ready cash to buy a property, owning a house almost always necessitates you to enter into mortgage, a legal agreement that grants conveyance of title to a creditor/lender as a loan security. Learn how the game works by browsing through the top home mortgage questions here:

Can mortgage rates be negotiated?

Yes, although banks and other lending institutions advertise specific mortgage rates, know that you can still haggle with the banker or agent for a much lower rate. Factors like creditworthiness, personal assets, and liabilities normally come into play during credit assessment. Since window periods are given, ensure that you lock in the loan before the expiry date.

Which is better a fixed rate or an adjustable rate?

The answer depends on your financial situation. With fixed-rate mortgages, the rate remains the same all throughout the loan period, whereas with adjustable rates, the initial amount may be lower yet over time it increases significantly. Factor in the inflation rate and your projected income and expenses so youll know which scheme works for you.

Should I go for a short-term loan?

This again depends on your financial capacity and goal. The conventional 30-year term has lower monthly payment compared to the 15-year term. But collectively, the contract price is higher for a longer term because of the prolonged period of interest payments. If you lack sufficient funds to endure the high monthly payments, youre still better off with the 30-year term. Some lenders allow re-calculation of interest such that your principal balance is of declining value. So choose creditors wisely.

What other factors must be considered when choosing creditors?

In addition to the calculation scheme, consider the following: 1) waiver of prepayment fees to avoid paying hidden additional costs for advance payments; 2) payment facilities that include both offline and online channels to ensure convenient paying; and 3) policy on temporary mortgage forbearance that allows suspension of payments without foreclosure or contract changes when your financial situation is shaky.

Should I pay for private mortgage insurance (PMI)?

Unless your downpayment is above the threshold for exclusion (normally 20%), you are required to pay PMI besides your regular monthly fees. Factor in this additional cost in your personal finance forecast then. Although, PMI payments are no longer needed when your principal balance is already about 80% of the original property value.

Should I pay for mortgage points?

Yes, if and only when the numbers work for your favor. Mortgage points are offered by lenders at a price to reduce the buyers interest, increase liquidity, and safeguard their interests in case the buyer only plans to stay shortly. Yet for buyers with long-term plans, buying mortgage points, equivalent up to 0.25% off the interest, equates to bigger savings. To know the numbers and the breakeven period, consider using online mortgage calculators.

For your other queries, especially when you intend to refinance your mortgage, its best to speak to an agent upfront. You may also do personal research and ask homeowners about the best options.