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Home » Long Term Cash » Mortgage
Recommended sites to shop for your next mortgage:
- Banks compete over you!
Mortgage
There is a good chance that your mortgage will be the largest loan you will ever have. Also, it is more than likely that your mortgage payment will be your single largest expense, with the exception of taxes. That being said, it is extremely important to be getting the best mortgage that you can, but unfortunately people often fail to shop around. People also forget that once they have their mortgage, they are free to refinance at any time they want. First, I will introduce terms you are probably familiar with, but I just want to clarify. Next, I will give you some pointers to ponder when looking for your mortgage, and finally I will provide some resources for you to start shopping around for your next mortgage.
These are terms you are probably already familiar with, but I figured I should still go over them to make sure we are all on the same page:
- Mortgage Payment – This is the sum of your principal + interest. This does not include taxes, maintenance, insurance, etc. If you have a fixed-rate mortgage, this payment will remain the same for the duration of the mortgage, and then eventually drop to nothing when you pay the whole thing off (usually 30 years).
- Rate – This is the amount of interest charged per year. Basically stated, it is the cost of “renting” the money. You can have either a fixed-rate or adjustable-rate. If you have a fixed-rate, your interest stays the same for the entire loan, and you have the same mortgage payment for the entire time. With an adjustable-rate, your interest adjusts with the market and economy, so your mortgage payment usually ends up changing throughout the mortgage.
- Down Payment – The money you have to put down for your home. If you buy a home for $100,000 and put 20% down, you pay $20k out of pocket and your mortgage would be for $80k.
- Mortgage balance – This is how much you would have to pay to completely pay off your mortgage. Generally speaking, your mortgage balance continually decreases over the life of the loan, eventually to zero, which happens when you make your last payment. This is because you pay a little of it off each month through your mortgage payments.
Now that we have clarified some of those terms, here are a few things to remember:
- Make sure you can easily afford the entire monthly payments - including taxes, insurance, maintenance, etc. I have heard that you shouldn’t be spending more than 35% of your income on housing costs, but I have seen people spending more than 60%.
- Make sure that your monthly mortgage payments will never increase. If they can, you are probably getting an “Adjustable-Rate”. This is typically more risky than a fixed rate, as your monthly payments can skyrocket to an unaffordable level after a few years.
- Be sure to consider any fees that will be charged for the loan origination. They can typically be a few thousand dollars.
- Watch out for any prepayment penalties. Sometimes lenders will charge you for selling the house and paying the rest of the mortgage off too early.
- Make sure you shop around for the best interest rate and terms. Signing up for the first mortgage you find isn’t always in your best interest. (Pun intended. Ok, that wasn't funny. I'll stop trying.). Call around to be sure that you are getting market rates.
Finally, here are some places to start researching mortgages:
- - Banks compete over you!
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