Factors to Consider as You Take Out a Mortgage

Some consumers might consider mortgages a necessary evil - but in fact, they can be excellent financial tools for those consumers who use them wisely. While financial experts agree that you should do everything you can pay your mortgage on time each month and work to eventually own your home free and clear, it is also true that homeowners can realize extensive financial benefits through their home mortgages. So whether you're looking to realize possible tax benefits, explore your fascination with home decor by remodeling your home or are looking to reduce your monthly expenses, your home mortgage could offer you solutions.

If you are considering buying a new home, refinancing your existing mortgage or taking out a home equity loan/line of credit, it is essential that you understand the inner-workings of mortgages. This is not only for your personal financial protection, but also so you can make the most of your financial decisions. As you conduct your research, get matched with lenders through SalinasHome.com and prepare to review competitive quotes, make sure you understand these factors and elements of your new loan:

• Loan program: Are you looking for a fixed-rate loan or an adjustable-rate loan? Each has its own pros and cons. If you have a fixed-rate loan, you will pay the same amount for the duration of the loan (likely 30 years, but possibly 15 or 20). This is an excellent choice for a homeowner who plans to stay in the home for many years, and was approved for a loan at a low interest rate. But if interest rates are high and you think that you might not stay in the home for more than a few years, and adjustable-rate mortgage could be a wise solution. Be sure you understand which type of loan you're applying for, and the benefits of each.
• Points: While we often look at the monthly payment and interest rate for a proposed mortgage, we sometimes forget to look at the overall costs. Your lender may charge you a variety of fees to process your mortgage, including an origination fee, title fee, escrow fee and something called "points" or "discount points." If your lender charges you 1 point on your $150,000 loan, that will amount to a $1,500 fee - 1 point is 1 percentage point of your mortgage. There are a variety of opinions about points - ranging from "they're great!" to "they're evil!" so it' up to you to decide whether you are comfortable paying extra fees to, potentially, lower the interest rate of your loan. Carefully review all the fees and charges on your Good Faith Estimate. If you have a mortgage with a low interest rate but thousands of dollars in fees, it could cost more than another loan with lower fees but a slightly higher interest rate.
• Term: For many years, the standard term for a mortgage has been 30 years. But times have changed. If you can afford it, a 15-year term might be your best option - you will increase your home equity at a much faster rate, and will own your home in just 15 years. But there are also 20-, 25- and 40-year programs; it's important that you think about your personal goals and what is best for you and your family. Remember to use your mortgage wisely.