Mortgage Loans (Part 4)

Interest rate of Mortgage loans- problems

In the loan period, there are many situations which can be appear, one of them is pay more interest. Some lenders will waive the mortgage insurance requirements if the buyer accepts a higher interest rate on the mortgage loan. And when the interest rate increase, you need to pay more, the ranges from 3 quarters of a percentage points which depends on the down payment. A baisc point is 1-100th of 1 % point. You can benefit from this because the mortgage interest is tax deductible, so the mortgage insurance premiums are not. But they will end up paying more interest over the life of loan with the higher interest rate.

Do you have any experience about the 80-10-10? This involves to get 2 loans. The borrowers have the first mortgage equal 80% of the sale price and a second mortgage for another 10% and puts the remaining 10% down at close. But the second mortgage will have a higher interest rat. But when yyou app;ly for 10% of total loan, the monthly payment can be lower the the monthly payment on 1 home loan with mortgage insurance. Additionally, interest on the second mortgage is tax deductible, so 80-10-10 loan is not the only plan they have, borrowers can get 80-15-15 or otherss.

And when you want to find out how much your mortgage cost, the lenders often give you quotes which include both loan rates and points. Now, you need to understand about the POINT.

It is a fee to 1% of loan amount. Lender can charge 1,2 or more points. There are 2 types of points:

1, Discount Points:

They are prepaid interest on mortgage loan and if you pay more points, the interest rat will be decresed. But the borrowers often pay from )-3 or 4 points, it depends on how much they want to lower their interest rate.

2, Origination:

This is charged by the lender to cover the costs in making loan, this fee is deducted if it was used to obtain the mortgage and not yet pay at closing costs. It is known as the notary fees, preparation costs or inspection fees...

And the points will depend on the number of factors such as how much money you have to put down at closing and how long you want to stay in your house... A notice you need to remember is while mortgage lenders control who gets approved for the loan and terms, actually mortgage interest rates are largely determined on the secondary market where mortgage are bought and sold.