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F.A.Q.
- Can I make extra principal payments to pay off my loan soone
Usually, yes, you can make extra principal payments at any time, in part or in full. However, check the policy of your loan first as some lender's loans may be subject to prepayment penalties.
- Once a person gets a mortgage, is there a length of time one
Unless there is a prepayment penalty clause in a mortgage, you should be able to refinance anytime you choose. Although, if you’re thinking of refinancing very soon after getting a new loan or mortgage, chances are that you did not do enough research the first time or, if you did, your refinancing decision now needs to be re-examined.
- What are the advantages of purchasing a home?
Purchasing a home gives you personal benefits such as a sense of buying a stake in your community, and pride for achieving home ownership. However, there are some strong financial benefits as well. One of the largest benefits of homeownership is the tax savings you receive. Interest payments on a home mortgage are 100% tax deductible. And, as you continue to pay your mortgage payment, you are building equity in your home, as opposed to a rent payment that goes into somebody else's pocket. You build equity faster as the value of your home increases, and you can borrow against that equity to pay off debts, send your child to college, make home improvements, or take a much needed vacation. With today's low or no down payment options, affording a home is a lot easier than you may think.
- What is a home equity line of credit?
A home equity line of credit is a form of revolving credit in which your home is used as collateral. Home equity lines of credit feature a variable interest rate and a draw period. For more information on this topic, please see our Home Equity Line of Credit ADD LINK: Home Equity Line of Credit .
- What is a mortgage?
Generally speaking, a mortgage is a loan obtained to purchase real estate. The "mortgage" itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.
- What is APR and how is it calculated?
APR stands for annual percentage rate and is designed to give borrowers a truer representation of the effective interest rate on their mortgage. APR factors in certain closing costs and fees and spreads these costs over the life of the mortgage, along with the note rate, to arrive at a more accurate annualized percentage rate than the note rate alone represents.
- What is cash-out refinancing?
Cash-out refinancing is a transaction in which a new mortgage is issued that is greater than the outstanding unpaid principal balance of the previous mortgage. Cash-out transactions allow homeowners to spend the equity they have accumulated in their homes. It differs from a home equity loan or line of credit in that it's a new mortgage, not a second loan against the equity in a home. Both cash-out refinancing and home equity loans provide vehicles for taking cash from the home's equity. For more information on this topic, check out our refinancing to get cash ADD LINK: Refinance to get cash .
- What is private mortgage insurance (PMI)?
Private mortgage insurance or "PMI" policies are designed to reimburse a mortgage lender up to a certain amount if you default on your loan and your house is not worth enough to entirely repay the lender through a foreclosure sale. Most lenders require PMI on loans where the borrower makes a down payment of less than 20%. Premiums are usually paid monthly and typically cost around one-half of one percent of the mortgage loan. You can normally cancel the PMI once your equity in the house reaches 20-25%, so long as you've made timely mortgage payments.
- What's the difference between a fixed and an adjustable rate
With a fixed rate mortgage, the interest rate and the amount you pay each month stay the same over the entire mortgage term, traditionally 15 or 30 years. A number of variations are available, including five- and seven-year fixed rate loans with balloon payments at the end.
With an adjustable rate mortgage (ARM), the interest rate fluctuates according to the interest rates in the economy. Initial interest rates of ARMs are typically offered at a discounted ("teaser") interest rate that is lower than the rate for fixed rate mortgages. Over time, when initial discounts are filtered out, ARM rates will fluctuate as general interest rates go up and down. Different ARMs are tied to different financial indexes, some of which fluctuate up or down more quickly than others. To avoid constant and drastic changes, ARMs typically regulate (cap) how much and how often the interest rate and/or payments can change in a year and over the life of the loan. A number of variations are available for adjustable rate mortgages, including hybrids that change from a fixed to an adjustable rate after a period of years, or "option ARMs" that allow you to choose, on a monthly basis, whether to pay a minimum amount, an interest-only amount, an ordinary principal plus interest amount, or an accelerated payment amount. For more information on ARMs, visit our adjustable rate mortgage page here .
- Why Refinance your Mortgage?
There may be several reasons why refinancing a mortgage could be a good option for you. The reasons below are just a few justifications for such a decision:
- Refinance to pay off your first mortgage and reduce your mortgage rate and monthly payment.
- Refinance to pay off your first mortgage and take out some additional cash.
- To pay off your first and second mortgages (excluding home equity lines) and reduce your mortgage rate and monthly payment.
- To pay off your first and second mortgages (including home equity lines) and take out some additional cash.
- To pay off your first mortgage and your home equity line, closing your home equity line to any further advances.
- To pay off your first mortgage and your home equity line, paying the home equity line balance to zero but leaving the equity line open to further advances.
- To pay off your mortgage(s) and reduce your mortgage term (i.e. refinancing a 30 year to a 15 year).
- You currently have no mortgage liens on your property and wish to obtain cash by applying for a first mortgage.
- You currently have a construction mortgage loan and wish to pay it off and obtain permanent financing.
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