25
Feb
By First Rate Financial Group
Mortgage

An Overview Of Mortgage Points On Home Loans

An Overview Of Mortgage Points On Home LoansUnless someone works in the real estate or mortgage industry, there is a high likelihood that they are going to run into unfamiliar terms. Appraisals, underwriting, and private mortgage insurance are a few of the examples. One of the most common terms that people might run into is termed mortgage points. Even though the term “points” might sound positive, this is not always the case. What do people need to know about mortgage points? 

Mortgage Points Refer To Payments Due At Signing

When someone is negotiating for a home loan, they want to get the lowest interest rate possible. There are several ways that potential homeowners can get the interest rate reduced on their home loan. One option might be to increase the down payment. Another option might be to pay a percentage of the loan amount at signing.

Usually, mortgage points refer to a certain percentage of the loan amount that is due at signing. For example, someone who is being charged one mortgage point will pay 1 percent of the loan amount at signing. Why would someone want to pay a percentage of their loan early? 

Mortgage Points Are Usually Paid In Exchange For A Lower Interest Rate

The most common reason why someone might pay mortgage points upfront is that they can bargain for a lower interest rate. For example, someone might be able to pay one mortgage point in exchange for having the interest rate on the rest of the loan dropped by 0.25 percent. Therefore, points go both ways. It is nice that someone can pay mortgage points to have the interest rate lowered on their loan; however, is this the correct decision? 

Borrowers Have To Do Some Math

Ultimately, this comes down to a math equation. If a potential homeowner is forking over more money at signing, they are not going to be able to earn interest on that money in their bank account or the stock market. On the other hand, they will save money over the life of the loan because the interest rate will be reduced. Therefore, homeowners have to do some math and compare the interest they are losing by paying money upfront compared to the interest they are saving on the home loan.

 

09
Feb
By First Rate Financial Group
Mortgage

An Overview Of Private Mortgage Insurance

An Overview Of Private Mortgage InsuranceWhen you are going through the process of looking for a new home, you are probably focused on the sticker price of that home. Even though it is important to think about your down payment, your monthly mortgage payment, and the total amount of the loan, there are other expenses that you might need to cover as well. If you do not put down enough money, there is a chance that the lender could ask you to pay for something called private mortgage insurance. What is private mortgage insurance and how much do you have to pay? There are several important points that you should keep in mind.

Why You Might Purchase PMI

Private mortgage insurance is something that the lender may ask you to purchase as a way to reduce their risk. If you do not make a sizable down payment, then the lender is responsible for funding most of the cost of your home. If you end up defaulting on the cost of that loan, the lender will lose a major amount of money. With PMI, the lender will be able to get his or her money back in the event that you default. Even though the exact cost of PMI will vary, you should expect to pay somewhere between 0.5 percent and 2 percent of the loan. You might be able to ask the lender to check with multiple options to find the least expensive policy possible for you. Once the PMI policy is instituted, this is something that you will have to pay on top of your monthly mortgage payment.

Avoiding PMI Payments

Importantly, there are ways that you can avoid PMI. You might be able to avoid this insurance policy altogether if you are able to increase the size of your down payment. If you cannot do that, the PMI policy will usually be canceled when you reach a certain threshold in equity. This is something that you should negotiate with the lender before you sign on the dotted line. In some cases, the PMI policy as waved when you reach 10 percent of the loan amount paid back. Even though you should check with a professional accountant, PMI is likely tax-deductible, similar to mortgage insurance.

 

04
Feb
By First Rate Financial Group
Mortgage

What Homeowners Must Do When Behind On Mortgage Payments

What Homeowners Must Do When Behind On Mortgage PaymentsThere are lots of homeowners who fall on rough times from time to time. For example, some people may be in the midst of changing jobs. Other people might be going back to school. When this happens, it can be hard for homeowners to keep up with their mortgage payments. Even though they might be thinking about waiting for the bank to do something, this would be the ultimate mistake.

There are ways to handle late mortgage payments as long as homeowners reach out to the lender to discuss their options. What should homeowners do if they start falling behind on their mortgage payments?

Let The Lender Know Why They Are Falling Behind

If lenders do not hear anything from the homeowners, they are not going to know what is going on. Therefore, they may end up taking drastic action. The first thing that homeowners need to do is to let the lender know that they are falling behind on their mortgage payments. That way, the lender understands that the homeowner knows he or she is behind on the mortgage. Then, let the lender know why the mortgage payments will be coming in late. For example, there might be an unexpected medical expense that took the mortgage payment that month. Or, the homeowner might be looking for a new job. These are all understandable reasons why the mortgage payments might be late. 

Ask The Lender To Go Over The Options

Next, the homeowner also should discuss with the lender all of the options when it comes to late mortgage payments. There are lots of options available. If there is a one-time unexpected expense, the lender might simply break up that payment and spread it out over the upcoming payments without charging any extra interest. Or, the lender might be willing to simply add a few months to the mortgage in exchange for not charging a late fee. These are a few of the many options the lender has at his or her disposal.

Do Not Ignore Late Mortgage Payments

The only mistake that homeowners can make with late mortgage payments is not communicating with the lender. As long as the lender understands what is going on, homeowners should have options at their disposal.