Home Mortgage Tips Archives – Page 3 of 32

06 Oct 2023

Setting Your Budget: How to Analyze Your Finances to Determine How Much Mortgage You Can Afford

Home Mortgage Tips

Setting Your Budget: How to Analyze Your Finances to Determine How Much Mortgage You Can Afford Whether you’re buying a home for the first time or you’ve decided it’s about time that you upgraded to a larger, more expansive house, if you’re making a real estate purchase you’ll need to be aware of how much you can reasonably afford to borrow in a mortgage. In today’s post we’ll take a look at a few ways that you can analyze your financial situation to help decide how much mortgage you can truly afford.

Prepare An Honest Monthly Budget

The first step in understanding how much of a monthly payment you can afford is to create an honest monthly budget which includes all of your family’s income and spending. Although you won’t have to pay them every month, it’s also important that you include costs that show up irregularly like car repairs, Christmas gifts or tuition bills as these still need to be paid. The more information you can place in your budget, the more accurate your financial picture will be.

Your Down Payment Plays A Huge Role

As you might imagine, the amount you can invest in your down payment plays a significant role in how much mortgage financing you will need. Every dollar that you can place in your down payment today is one less dollar that you’ll need to borrow and pay interest on over the amortization period of your mortgage. Take some time to consider how much you can put down, and see if there’s any way you can bump this figure a bit higher.

What Interest Rate Will You End Up Paying?

Small changes to your mortgage interest rate can have significant impacts on how much you are required to pay back over the life of your mortgage. As you’re shopping around, be sure to consider how long your interest rates are valid for and try to determine the lowest rate you might qualify for. You may also find it helpful to use an online mortgage calculator which can help you to understand how your interest rate impacts your monthly payments.

Consult A Mortgage Professional To Learn More

While building a quick budget to analyze your family’s expenses is easy, factoring in all of the various items that a lender will consider might be harder than you expect. If you have questions about the mortgage process and whether or not you’re ready financially, contact your local mortgage professional today.

03 Oct 2023

By Kevin Gahagan

4 Facts You Need to Know Before Setting Up a Mortgage Escrow Account

Home Mortgage Tips

4 Facts You Need to Know Before Setting Up a Mortgage Escrow Account Buying a home involves a variety of nuances and strange-sounding terms, and one of the least understood aspects of the home buying process is the escrow account. Essentially, an escrow account is a third party bank account your lender can require you to pay into in order to cover certain costs related to your home. Your lender uses an escrow account to ensure that property taxes and home insurance fees get paid on time.

But how exactly do escrow accounts work? Here’s what you need to know.

Escrow Accounts Are Mandatory With Certain Mortgages

Not all home buyers are required to have an escrow account. In cases where the buyer pays 20 percent of the purchase price down, lenders will typically waive the escrow, as the buyer has proven liquid assets that can be used to pay property-related fees. But depending on your type of mortgage, you might be required to have an escrow account.

If you bought your home with an FHA loan, you must have an escrow account. Similarly, if your down payment is less than 20 percent, you’ll most likely be required to have an escrow account.

You Can Choose To Pay A Lump Sum Or A Monthly Fee

As your lender uses your escrow account to pay property fees, you’ll need to ensure the account has the available funds to cover taxes and insurance. Typically, your lender will provide you with a set of payment options to keep the account topped up. You may be able to choose whether to pay your escrow fees in an annual lump sum or in 12 equal payments throughout the year, however paying monthly is the most common scenario.

Escrow Payments Can Change Over Time

When your escrow payments begin, you’ll be given a payment schedule with a set payment amount. But just because you start paying $150 per month into the account, that doesn’t mean your monthly payment will stay at $150 per month. If your insurance rates or taxes increase, you’ll need to make larger escrow payments to cover the difference in cost.

Cancelling An Escrow Account May Not Be Easy

An escrow account is a fairly permanent mortgage fixture – once it’s established, there are very few ways to get rid of it. Some escrow agreements do allow you to request a cancellation, but they’ll require you to have a set amount of equity in your home, or pay a cancellation fee, or both. Refinancing will close an escrow account, but you’ll need a 20 percent down payment equity position when doing the refinance to avoid opening a second account.

Setting up an escrow account is a great way to automate your bills and ensure your mortgage is paid on time. Call your local mortgage specialist to learn more.

28 Sep 2023

By Kevin Gahagan

A Quick Look at Reverse Mortgages: The Golden Ticket to Enjoying Your Golden Years

Home Mortgage Tips

A Quick Look at Reverse Mortgages: The Golden Ticket to Enjoying Your Golden Years With a high volume of millennials set to enter the real estate market this year, it may seem like all the available options out there were created to snag new home buyers. However, there are products available on the market that cater to those who are in their golden years too. If you’re older than 62 and are currently weighing the options with your mortgage, here are the basics on reverse mortgages and why they might positively benefit you.

The Scoop On Reverse Mortgages

It may seem like this mortgage option hasn’t been around that long, but it was actually created in 2009 following the recession. Known as the Home Equity Conversion Mortgage for Purchase (HECM), this product is specifically directed at those who are retired or close to retirement that want to tap into the equity in their home. This option is only beneficial for those who plan on staying in their home long term, the loan is paid off at the time the homeowner moves out or passes on.

What Are The Requirements?

Because a reverse mortgage enables the homeowner to tap into the equity they’ve already paid into their home, there are many requirements involved in using this type of mortgage product. In addition to being 62 or older, the homeowner will have to have a high amount of equity in their home. They will also have to prove that they have the financial ability to make their monthly payments, in addition to being able to pay the insurance and property taxes on the property. The homeowner will also have to comply with the requirements set out by the Federal Housing Administration.

Is It The Right Choice?

Like any mortgage product, it’s important to determine before choosing this mortgage product that it’s right for you. While a reverse mortgage gives the benefit of providing access to cash and allows you to put your money elsewhere, it can end up costing more down the road since interest will continue to accrue on the principal amount owing. Before diving in, ensure that you do the calculations and consult with a professional to ensure it’s going to be a financial benefit in the end.

A reverse mortgage can be a great means of accessing cash for homeowners who are 62 or older, but it’s important to weigh all the financial aspects before making a final decision. If you’re currently looking into your mortgage options, contact your trusted mortgage professionals for more information.

27 Sep 2023

By Kevin Gahagan

Understanding Mortgage Amortizations and Why Longer Periods Can Cost More

Home Mortgage Tips

Understanding Mortgage Amortizations and Why Longer Periods Can Cost More Buying a home is one of the largest investments you will make in your life, and that’s why so many people have longer mortgage amortization periods to pay down the principal. While it may seem appealing to have a longer amortization period, here’s why an extended loan term can end up costing you more and may be less financially beneficial when it comes right down to it.

About Mortgage Amortization

Generally speaking, a 25-year mortgage amortization period can be typical, but there are many loan periods that a homebuyer can choose for amortization. While a longer-loan period may seem enticing because it will mean a smaller monthly payment, a shorter amortization will enable you to own your investment sooner, which can be a great boon for many people. It’s worth being aware of what works best for you as this will depend on your financial situation.

Paying Off The Principal

For those who have a high monthly payment, a longer mortgage period can seem like a benefit. However, while this will lower your monthly payment, it also means that you will be paying less on the principal over time and this can cost you when it comes to interest. A shorter loan period, on the other hand, may force you to re-do your budget to make the monthly payment, but you’ll be paying more on the principal each month and less on interest over time. A 25-year term may sound good at first, but a shorter term may be more financially lucrative in the long run.

What Works Best For You?

It may seem like a shorter loan period is the right financial decision, but there are a lot of factors that go into determining what will work best for you. If your interest rate is low and you’re struggling to make your monthly payment as it is, a longer loan period may be for the best. However, if you have the money in the bank and you can still live your life while saving a little bit extra, a shorter loan period may be an option that saves money in the end.

On the surface, a longer loan period and a shorter monthly payment may seem optimal, but it’s important to weigh all of the variables before deciding on your mortgage amortization. If you’re currently getting prepared to invest in a home, you may want to contact one of our mortgage professionals for more information.

20 Sep 2023

By Kevin Gahagan

Looking to Pay Back Your Mortgage Faster? Three Reasons to Consider Switching to Bi-weekly Payments

Home Mortgage Tips

Looking to Pay Back Your Mortgage Faster? Three Reasons to Consider Switching to Bi-weekly Payments While there are differing schools of thought when it comes to whether or not a person should pay off a mortgage before the loan term ends, there may be some benefits to making payments on a bi-weekly basis as opposed to monthly basis. What are some of the reasons why it may be beneficial to make two payments a month instead of one? Here are three reasons why you should ditch the monthly fees and make payments once every two weeks.

You’ll Make An Extra Payment Per Year

If you’re looking to pay off your mortgage ahead of schedule, making bi-weekly payments means you’ll make an extra payment every year. Instead of making 12 large payments every year, you’ll make 26 small payments. These 26 small payments would be equal to about 13 large payments.

This is the equivalent of an extra payment per year and 10 extra payments over 10 years. If you have a 30-year mortgage, you could pay it off between two and three years early because you will make your last payment 30 months ahead of schedule.

You’ll Provide Yourself With Financial Flexibility

Making extra payments can provide you with financial flexibility that makes it easier to deal with unexpected expenses or a job loss. As you are making a half-payment every two week, you can make your payments in smaller, more manageable chunks.

It may be a good thing if you are self-employed and may not be sure when a client will pay for services rendered. Additionally, you may have your next payment reduced or advanced if you pay more than you owe in a given month.

You’ll Reduce the Amount of Interest Paid on the Loan

Paying off your mortgage faster reduces the amount of interest that you pay on the loan. Even if you only make one extra payment per year, you could still save thousands of dollars in interest by paying your loan several months or years early.

To determine exactly how much you will save, you can use an amortization table or calculator to see how much interest you pay over the full 30 years as opposed to taking only 27 or 28 years to pay for your home. It is also important to note that making extra payments adds to the equity that you have in the home.

Making two payments instead of one each month may help you achieve financial flexibility while building equity in your home. By paying off your mortgage as soon as possible, it may enable you to put more money into a savings or retirement account. Contact a mortgage professional for more information about whether bi-weekly payments are right for you.