What You Should Know About Mortgages
A mortgage is a secured loan which uses your home as collateral. Of all the financial transactions you’ll ever enter into, it’s one of the most complicated. But you shouldn’t worry. You’ve already taken the Home Buyability™ Test and know how much home may be right for you. Banks want your business and are eager to help you though the process. And in this section of BankSITE® Online, we’ll give you a tour of the mortgage process.
You’ll learn about the types of mortgages and get help deciding which is best for you. You’ll learn how to apply for a mortgage, how to calculate your monthly payments, and how to close on your new home. We also provide you with information to help you decide whether you should consider refinancing.
You can review all this information first, or shop for a mortgage. Our BankSITE® Directory provides you with information on mortgages offered by banks all around the country.
Types of Morgages
Basically, there are two types of mortgages:
Fixed Rate Mortgages.
This type of mortgage is also sometimes called a conventional mortgage. With a fixed rate mortgage, you pay the same interest rate the entire term of the mortgage, which usually ranges from 10 to 30 years.
The name of this mortgage is sometimes shortened to ARM. With an ARM, the interest rate is pegged to the rates for US Treasury securities. Your interest goes up and down, allowing you to take advantage of lower payments during economic periods when interest rates are low. Some ARMs give you the option to convert to a fixed rate mortgage later, for a fee much lower than the typical fees for appraisals and credit associated with refinancing.
If you’re not sure which type is best for you, we can help you in the section below.
Finding the right mortgage can save you lots and lots of money over the long term. So we’ve provided lists of things to think about when shopping for a fixed rate or an adjustable rate mortgage.
Tip 1: Shop for a lender. Compare rates, terms, penalties and points.
Tip 2: Make sure there are no prepayment penalties.
Tip 3: Choose a shorter term mortgage.
Tip 4: Shop for a lawyer to save money.
Tip 5: If you can’t afford a shorter term, consider prepaying a portion of your principal every month.