Save Money on Your Mortgage by Knowing Your Options

A mortgage is probably the least fun subject when it comes to buying a new home. However, having a good handle on mortgage options is the easiest way for homeowners to save money. The crazy low interest rates of the past few years are gone. While current rates are still historically fairly low, there are things you can do to make your mortgage even more affordable.

First things first – while you should educate yourself about your mortgage options, always consult a licensed lender and real estate professional before deciding how to proceed.

Home mortgages are divided into two major sources – private lenders and the U.S. government. The rates and terms vary widely between the two. For example, if you are a veteran, you can get a loan through the VA. The down payment required is greatly reduced, but the obligations required of the home seller make this funding source more challenging in terms of getting a deal done. Private lenders are typically banks or mortgage brokers; banks have their own products while mortgage brokers can find mortgage products from multiple sources. There are advantages and disadvantages to both.

A mortgage will have either a fixed or an adjustable rate of interest. With a fixed-rate mortgage, your interest rate is set for the life of the mortgage. These mortgage types usually have two term choices: 15 or 30 years. The 15-year option typically has a better rate but higher payments, as you’re paying off the loan more quickly. If saving money overall is the goal, a 15-year term can be the best choice.

An adjustable-rate mortgage has an interest rate that can change, either up or down, throughout the life of the loan. The term between rate adjustments can be as short as three years, but the rate will start out lower than with a fixed-rate mortgage. There are caps and limits to how high the rate can adjust, which offers some protection against the unexpected. Adjustable-rate mortgages can make the most sense if your new home is not your forever home, since you will be able to take advantage of the lower rate before deciding to sell.

The world of home mortgages is complicated. There are many factors that affect the type of mortgage, the interest rate, and your choice for a down payment. There is no way to get it all straight without discussing it with someone who knows you and knows what to expect in the current marketplace. Visit AddressNIllinois.com to get straight answers from experienced professionals.