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Thursday 23 March 2017
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How a Mortgage Broker Can Help You

When you want to buy a home or other real estate with a loan, you will need to fill out a mortgage loan application. However, before you apply, it is a good idea to know what type of mortgage you need for your specific situation. Banks have specific criteria that you must fulfil in order to be eligible for a mortgage loan from that bank. You may have better luck if you work with a company that will find the best lender for you. Click here to learn about finding the best mortgage rates.

Different Types of Mortgages

There are many different types of mortgage loans, but they all fit into the two basic categories, which are fixed-rate mortgage (FRM) and adjustable-rate mortgage (ARM).

A fixed-rate mortgage has the same interest rate for the whole repayment term. This means the monthly payment stays the same throughout the term of the loan, no matter how long it is. This is true even for long-term loans such as 30-year loans. If this is the right type of loan for you, your payment will never change.

An Adjustable-rate loan will have an interest rate that adjusts or changes at certain times throughout the term of the loan. It will normally change every year after a period of being fixed. This is why it is often called a hybrid financial product because it starts with a fixed rate of interest and changes after the stipulated period. For example, a 5/1 adjustable-rate loan has the same rate of interest for the first five years, then it adjusts every year.

Choosing the Right Type of Loan

Fixed-rate loans and adjustable-rate mortgages have pros and cons. Some points to consider:

  • The ARM starts with a lower interest rate than the FRM, but could go higher later
  • The ARM rates and payments could rise quite high over time
  • The FRM never changes interest rate or amount of payment
  • The FRM has higher interest rates because of the long-term stability

Refinancing Your Property

Refinancing means the borrower gets a new mortgage to replace the original loan. The borrower can start fresh and get a better interest rate and term rate. There are many reasons to refinance a loan, but the goal is usually to lower the interest rate. You may want to change from a fixed-interest rate to an adjustable-interest rate or vice versa. There are several types of refinancing, but the most common is the rate-and-term type. This means the original loan is repaid in full, and replaced with a new loan. The other type is a cash-out loan in which you get the equity built up in your home in the form of cash without selling your home.

Refinancing may give you extra cash to consolidate your debts, invest or renovate your home to improve the selling price.  Refinancing may not always be your best option, which is why it is important to get good financial advice from a company that offers several financial services such as finding the best lender and determining if refinancing is the right step.

Reverse Mortgage

A reverse mortgage may be a good idea for a retiree who has a lot of equity in his or her home or other property. This type of mortgage is like borrowing money against the value of your home. There is no repayment unless the borrower sells the house or dies. There are several factors involved in a reverse mortgage. For example, one advantage is that the borrower’s credit rating does not matter and is usually not checked because repayment only happened when the house is sold. The heirs may have the option of paying off the mortgage if they do not want to sell the house. As with most complicated financial transactions, it is better to get expert advice before making a decision this big.

When you find a mortgage agency that has years of experience in all aspects of real estate, including mortgages, insurance, investments and notarial services, you have a better chance of getting the right property and a suitable loan with the best possible terms and conditions than if you try to do it yourself.