A Mortgage (also called a home loan) is a legal contract made between a lender and a borrower that uses property as collateral to secure the loan. The lender can take possession of the property if the borrower fails to pay the prearranged home loan payments.
A homeowner acquires a new loan to pay off an existing loan. Reasons homeowners refinance is to lower their interest rates and/or access cash from their home equity.
It is a closed-end home loan secured by the borrower’s residential asset. The reasoning to usually get a home equity mortgage loan would be to pay off debt or to make home improvements.
One of the best reasons to refinance is to lower the interest rate on your existing loan. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%. However, many lenders say 1% savings is enough of an incentive to refinance.
Refinancing a mortgage involves taking out a new loan to pay off your original mortgage loan. In many cases, homeowners refinance to take advantage of lower market interest rates, cash out a portion of their equity, or to reduce their monthly payment with a longer repayment term.
For most mortgages, lenders calculate your principal and interest payment using a standard mathematical formula and the terms and requirements for your loan.
The loan-to-value (LTV) ratio is an assessment of lending risk that financial institutions and other lenders examine before approving a mortgage. Typically, loan assessments with high LTV ratios are considered higher-risk loans. Therefore, if the mortgage is approved, the loan has a higher interest rate. Additionally, a loan with a high LTV ratio may require the borrower to purchase mortgage insurance to offset the risk to the lender. This type of insurance is called private mortgage insurance (PMI).
An adjustable rate mortgage is a mortgage loan whose interest rate is episodically adjusted based on an index. The monthly payments made by you may change during the term of your mortgage loan with the changing interest rate. The fluctuating rates pass on part of the interest rate risk from the mortgage lender to you.
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This loan program is for the benefit of seniors giving them the ability to supplement their income. It is a contract between the lender and the homeowner in which the lender makes regular payments to a homeowner for a specific period of time. The monthly payment received by the homeowner is based on the amount of equity the homeowner has in the home. The monthly payment is a non-recourse loan hence; the payment is tax free to the homeowner. The homeowner is allowed to reside in the home until they relocate or till death of homeowner. At that period, the lender sells the home and recovers his loan.
A mortgage broker is the middleman who helps match borrowers with lenders based on corresponding needs and standards. Mortgage brokers arrange more than 80% of all transactions between borrowers and lenders, yet mortgage bankers actually finance and distribute the largest portion of home loans compared to all other lenders.
Annual Percentage Rate ( APR ) is the percentage used to figure out the total cost of your cash advance loan by taking into account all fees charged by your lender in addition to your loan principle and interest.
Mortgage loan is taken out after the first mortgage and secured against the same asset as the first mortgage loan. A mortgage loan is based on the amount of equity or ownership interest you have in your home.
A HELOC is simply an open-end loan set up as a line of revolving credit for some maximum draw, instead of a fixed loan amount in which your home is collateral. This is an open-end loan that permits the borrower to repay and re-borrow the funds available. HELOCs can be used to pay for several important items such as college education tuition, private school education, high interest debt, home improvements, home renovation, and major medical bills.
READY TO PURCHASE OR REFINANCE?