Buying and financing a home requires taking on a mortgage. Without a doubt, and you’ve heard this before, this purchase in all likelihood will be the biggest financial undertaking in your career. Mortgage loans are a good thing. Without them someone would have to save up enough cash to pay for the home outright or take out very short term loans like they did prior to the introduction of FHA mortgages way back in 1934. When choosing a mortgage you’ll choose not just the program but also the term of the loan.

Loan terms are typically available in terms ranging from 10 to 30 years in five year increments. Lenders offer 10, 15, 20, 25 and 30 year loan terms. Longer loan terms provide lower monthly payments but there is a downside to the longer term- more interest paid to the lender. A 30 year mortgage will have nearly three times as much interest as a 15 year note. However, due to the higher payments someone may not qualify for a loan with a shorter term and have no choice but to accept a 30 year term.

But borrowers can “create” their own shorter loan term by paying extra on the mortgage to shorten the life of the loan without penalty. How can you make extra payments? Most every mortgage program allows for extra payments to be made and many times it’s done by paying a little more each month on the mortgage. When you send in an extra amount each month, the additional funds go toward the outstanding loan balance and contrary to what some believe it does not go toward future interest.

You can also make a lump sum payment at any time. For instance, you receive a bonus or perhaps some inheritance money. You can take some or all of those funds and apply it to your mortgage loan, shortening the length of the loan.

Biweekly mortgage plans are still around but they’ve been shown to be an unnecessary and expensive option. A biweekly plan, usually offered by third parties, makes a partial payment every other week. Doing so means you’re making one extra payment per year yet most biweekly plans require a fee and the extra funds may not be paid when you think they are. Instead, you can set up your own by dividing one month’s payment by 12 (months) and add the amount to each month’s mortgage payment.

For more information or questions about mortgage loans,
Please visit Majestic Home Loan

Or Call  (855) 757-8748

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