Home loans can put a huge dent on your budget. On the average, you pay between 3% and 6% interest on your outstanding loan. But you need not have problems with your home mortgage if you do things right.
Shop For The Mortgage Offers
If you have a mortgage broker, he can help you in obtaining a home mortgage even if you have a low credit rating. On the other hand, if you have good credit rating, you only have to compare broker’s fees instead of creditor’s settlement costs. When you hire a mortgage broker, you have to ensure that his fees are disclosed in writing even at the initial stage.
If you don’t want to hire a mortgage broker, you have to ask for quotations from different lenders. For refinancing options, you can ask for a quote from your current mortgage provider because it can be cheaper and more efficient if you stick with your present lender. You have to be as detailed as possible in comparing various mortgage offers. You have to do a cost-benefit analysis in order to find out which of the offers is the best option for you.
The Truth About No-Cost Mortgages
A no-cost mortgage doesn’t really mean it’s free. It just indicates that all expenses relating to the mortgage are included either in the total loan amount or in the interest payments. If the expenses are included in the total loan amount, you may not be able to deduct the added expenses for tax purposes. Additionally, you’re also going to be charged interest on the added loan amount for the duration of the loan. It is best to take advantage of no-cost mortgages if the term of the mortgage is for a maximum of 4 years only. If you’re going to refinance or sell your home, you have to take into consideration these expenses as well.
Reducing Financing Costs
In a survey conducted by Bankrate.com in 2007, it was found out that on the average a homeowner pays closing costs of $2,736 on a $200,000 mortgage. That amount is exclusive of government fees, escrow, or taxes. Actually, you won’t know how much your closing costs are until you obtain the HUD-1 at least 3 days prior to closing. You have to learn about bait-and-switch or fee-padding techniques which mortgage lenders use so that you’ll know if you’re being duped or not.
Actually, you can save costs by knowing about the line items of the mortgage providers. Items such as processing, administration, and points and application fees are crucial in your efforts to reduce costs. The yield spread premium is a rebate paid to the broker or creditor and it is usually between 1% and 3% of the total loan value. The premium is usually presented as broker’s, lender’s or loan origination fee. If you have a good credit rating, you can negotiate for a lower yield spread premium.
Insurance and title search fees usually cost around $707. You can actually request for a reissue rate if your mortgage loan is not more than 2 years old. The reissue rate can be 50% – 70% less than the original rate. You can also request for a discount if your mortgage is 5 years old already. You may also negotiate a lower application, processing, underwriting, and document prep fees.
Consider Refinancing Costs
You have to shoulder the costs when you refinance. It is never free. You can’t refinance your mortgage every time the interest rates are cut because you have to pay closing costs, title insurance premiums, and application fees every time you refinance your loan. Therefore, you have to weigh the pros and cons when you decide to refinance the mortgage. Experts say that it is only when interest rates fall at least 1% and you don’t intend to sell your home in the near future can mortgage refinancing be an option for you.
Roger is a personal finance freelance writer. He provides advice to people about personal home loans, fast loan, solving financial problems and settlement loans. He loves adventure sports and watching football when away from work.
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