Are you looking for a mortgage to get a new home? Or when was the last time you had checked your mortgage? When you had the got the mortgage all those years ago, maybe it was a good deal, But how about now? Is it still a good deal.
When your financial situations improvers or change, your mortgage changes too, you need to know what is right for you and what is wrong? This is why; you need to know the basics of the mortgage. What elements will play an important role? How to use the mortgage calculator? Is the interest rate is low or high? When you know these things. You get to review your mortgage, work out a plan to get a better mortgage.
What features make a suitable mortgage
There are five main factors, which determine if a mortgage is right or not. Let’s check them out.
- The interest rate
There is no doubt; the interest rate is the most important in choosing a mortgage. The interest rate will decide how much mortgage you will end up paying for your house. A few points of difference, in the years to come, save ether save thousands or end up paying thousands more.
When took the mortgage all those years, the rates were high, but now maybe they are down. So, the question is now to see to get a good deal.
The simple thing to do is to compare the rate when you got it and now. Check out the current interest rate and then compare it to your original interest rate. You would find it on the original paperwork or the mortgage statement. Find out if the rate were fixed-rate or the adjustable interest rate.
If your fixed interest rate period is passed and you currently have the adjustable fixed rate, you need to contact your lender to check the current rate. To get things more clear for you, use the mortgage calculator. Once you have figure out, what you are paying, inquire with the lender to confirm it.
You should know that interest rates changes daily, so keeping up with the current trend is not such a bad idea. When you are comparing, this is what you should do.
- If the market rate is lower than your current interest rate, then considering a refinance is not a bad idea.
- If the market rate is high, then refinancing is not a good idea. To get an exact price, use a refinance calculator.
Apart from market rates, there are other factors, which will play an important role. Let’s see what those are.
- Your credit score will play an essential role. Check if the credit score has gone up or low. If it has gone up, then you might be qualified for lower interest rates.
- Your home equity will also affect the mortgage. The stronger is equity, the less money you will need to borrow.
- Your interest rate will also be affected by debt to income ratio. You will qualify for a lower rate if your income has increased or you have paid down debt.
- The loan structure and the loan term
Apart from the factors mentioned above, the other two critical factors are the loan structure and the loan term. An extended loan term means; a borrower ends up paying a lot more than short-term loans. But, in the long term, the monthly payments are lower.
The loan term interest rate will have one of these two payment types. First, it may be fixed-rate loans. It is a regular payment mode without any alteration in the monthly payment.
The second method is adjustable-rate mortgages. As suggested by the name, it will change as per the market situation. In the starting, for a fixed period, it begins with a fixed interest rate. But over time, it depends on the market.
- The repayment flexibility
Naturally, your financial situation will change over time. You may end up making more money. So, how may you need flexibility in your mortgage? If the current lender is not willing to help you, it is time to refinance. Do check out these factors.
- The first thing you should check is the prepayment penalties. If you pay the loan quickly, your lender may not make so much. So, before you make an extra payment, check out the charge for it. Make sure there is no charge for it.
- If your cash flow affects the monthly payment, you should try out Biweekly payments. Set up an automatic system where the payment is automatically made every 2 weeks.
Using a mortgage calculator is very simple. Open the calculator; enter the details such as Home valve, down payment, interest rate and the loan amount. It will show you the mortgage repayment summary.
So, these are three 3 factors that will help in having a suitable mortgage. These elements play a vital role in doing it. However, if you still need help, do let us know.
