Now that you've selected your lender, been approved for your mortgage, it's time to just sign away right? Nope. Before you do that, take a step back and learn some mortgage basics that can help avoid regrets down the road. While the loan you're about to sign is the potential gateway to your dream home, it doesn't mean it's your dream loan. It could feel great going down, but there might be some subtleties hiding in the fine print that you haven't noticed. Some mortgage lenders use crafty real estate jargon to incorporate certain less than favorable terms into the mortgage. Less than favorable for you the buyer, that is. Here are some handy tips to help you avoid poor terms from creeping into your agreement.
We can start by focusing on the type of loan you should avoid, the adjustable rate mortgage. When you have an adjustable rate mortgage, the interest rate you pay the lender is dependent on the value set by a given index specified in the loan terms. This means that when the government changes interest rates, for better or worse, you can get stuck in an uncomfortable situation. This is especially true in a struggling economy where interest rates are at a historic low; they can only go up from here. That would be bad news for your monthly payment. ทาวน์เฮ้าส์มือสอง
The balloon loan is another type of mortgage that will keep you up all night worrying. The terms of a balloon loan specify that the repayment must be made in total within a very short term, usually five years or less. The catch is that you do not pay a steep monthly payment during this period. Instead you have a relatively low monthly payment but at the end of the term the full balance is due. Therein lies the reasoning behind its namesake and the risk; you could be stuck with one very intimidating payment at the end that you don't have the cash for.
Some borrowers are sure that they will move before the loan fully amortizes (matures) and take this loan because of low monthly payment. The risk of being responsible for a lump sum payment to the lender if you stay longer than the term is not worth it. You may want to reconsider your lender if they try and rope you into a deal like this.
Perhaps the most important fact to remember is not to sign a loan that incorporates negative amortization. This means that the amount of your loan actually increases as you make monthly payments. This results from the fact that your monthly payment is not high enough to pay off the interest due for that month, and some of the principal (the original amount borrowed). The inherent danger here is that you could make payments for 30 years and owe more than you principally borrowed. It's easy to see the flaws in this concept, so do yourself a favor and stay away.
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