aztecs950 asked:


I’ve been trying to figure out if it’s worth using a bi-weekly payment schedule for my mortgage. I don’t know what equation to use in order to see if it’s worth doing every month. Any help would be appreciated!

mike cole asked:


It is a decision that is almost as important as which house you purchase – which type of mortgage to get. Choosing the right mortgage for your specific needs can potentially save you thousands of dollars over the term of the mortgage. Your two basic options when it comes to a mortgage will be a fixed rate (FRM) or an adjustable (ARM) mortgage, although you may also be able to qualify for other options such as an FHA loan or a VA loan.

Most home buyers take out a fixed rate mortgage – around 70% of all mortgages are fixed rate as opposed to adjustable. A fixed rate mortgage is exactly what it sounds like: the interest rate on your loan will not change, regardless of the economy or whether interest rates rise or fall. The terms and conditions of a fixed rate mortgage are also protected by law. An adjustable rate mortgage will go up or down depending on the interest rate at the time. Whether you should choose a fixed rate or adjustable mortgage depends on the general state of the economy along with your financial situation and the risk you are willing to take.

If interest rates are low when you take out a mortgage, or if you just do not want to take the risk of them increasing, you are probably better off with a fixed rate mortgage. If you have a large mortgage, whereby even a slight rate increase may mean a big increase in your monthly mortgage payment – you are perhaps better off with a fixed rate. If you are simply the cautious type who does not like taking a risk, a fixed rate mortgage is typically the best option for you.

The obvious advantage is that the interest rate does not change – and neither will the amount of your monthly payment. You always know exactly how much you will be paying each week and can thus budget more accurately; the amount of your monthly payment will only increase if the amount of insurance rates or the amount of property taxes increases. Some borrowers consider it easier to plan for other big expenses, such as college funds and retirement, with a fixed rate mortgage.

A fixed rate mortgage does not take into account the cost of living or inflation. In other words, as time goes by and you are perhaps earning more money and everything else costs that much more – your mortgage payment is going to stay the same. Arguably, this can mean more money in your pocket – in 20 years from now, you may be earning more money than you are now, but your monthly house payments are going to stay the same.

The biggest disadvantage of a fixed rate mortgage is that you run the risk of missing lower payments when the interest rate goes down. The difference in the amount that you pay each month can be substantial if you have an adjustable rate mortgage and the interest rate is lowered. This not only saves you money each month, but also potentially helps you pay off your mortgage sooner. Of course, nobody can ever accurately predict when interest rates are going to drop, although it is sometimes possible to have some indication and base your decision upon that.

A change in the interest rate can make a huge difference in determining the amount that you end up paying for your home. A homeowner with a 30-year mortgage can enjoy average savings of around $50,000 over the term of their mortgage with the interest rate being lowered by just one point. And an increase in the interest rate of just one or two percent can mean monthly payments that are between $50 and $250 higher, depending on the cost of your home. The decision to take a fixed rate or adjustable mortgage may also depend on whether you are taking out a 15 or 30-year mortgage.

One compromise of sorts is to take out a fixed rate mortgage and then refinance your loan when interest rates are lowered. Another option with a fixed rate mortgage (or an adjustable rate mortgage) is to pay extra each month towards the principal, thus saving a large amount in interest charges – as well as making the term of the mortgage shorter and owning your home sooner. Make sure that any extra amount that you pay is going towards the principal and not the interest.

It is a huge decision – whether to play it safe and take the fixed rate, or take a chance and go with the adjustable rate mortgage. Ultimately, the decision is yours; but be sure to get some good financial advice before deciding. A fixed rate mortgage has many advantages and disadvantages; you just have to decide which is best for your financial situation.

Shawn Thomas asked:


Taking out a mortgage loan is a major responsibility, and it is not one that should be entered into lightly. It is important that you take the time before you take out a mortgage to educate yourself about both your specific mortgage and about mortgage loans in general; this will help to make sure that you get the best deal that you can on the loan that you take out and will also ensure that you are going to be able to make your mortgage payments without any problem. While educating yourself about mortgage loans is not as simple as simply looking at interest rates, learning more about your mortgage before you take it out does not have to be difficult or complicated.

The first thing that you should do in order to learn more about the mortgage process is to take the time to learn a few basic definitions. The most important of these are terms such as principal (the amount that you have actually borrowed), APR (annual percentage rate, or the amount of interest that is being charged on your principal), and PITI (the components that are combined to determine your monthly mortgage payment: Principal, Interest, Taxes, and Insurance.)

Other common terms that you may want to know include balloon and interest-only mortgages (two mortgage types where you make smaller payments for five years or less, then pay the outstanding balance due on your mortgage as a single payment) as well as some of the additional costs that may be associated with taking out a mortgage loan. Such fees include application costs, closing costs, and brokerage fees, and in most cases they have to be paid out-of-pocket instead of being included in your monthly mortgage payment. Not every bank or lender charges all of the same fees so be sure to do some comparison shopping.

Once you have a grasp of some of the more common mortgage terminology, you should take the time to read as much as you can about how the mortgage process works in general. There are a number of books and websites that you can use to educate yourself about the mortgage process, detailing how it works from preapproval to making your final mortgage payment. Consulting multiple sources will help to make sure that you do not miss any important details that may be overlooked by a single source, and will also help to eliminate any bias that may be held by one source.

In general, the mortgage process begins with preapproval so that you will know how much you can borrow (which in most cases will only be a portion of the total value of the property being purchased) and will continue through the loan origination, credit checks, closing, and purchase. The property that is purchased will be used as collateral to guarantee the mortgage loan and ensure that the lender gets all of their money, and the lender will have a legal claim to the property (known as a lien) until the mortgage has been repaid in full. Once you have paid all of the money that is owed to the lender, the lien will be released and you will own the purchased property outright.

After learning about mortgage loans in general, it is time to start shopping around for a lender so that you can find the mortgage that will best meet your specific needs. Talk to various banks, mortgage brokers, and other mortgage lenders in your area, discussing the advantages of the loans that each offers and requesting quotes for the interest rates that they will likely charge you. This will give you an idea of how much you are going to have to pay every month on the loan that you eventually take out, and will also help you to get a feel for the various lenders in your area so that you will know which ones will give you the best deal. It is important to educate yourself about the mortgage process in general before you start shopping around for quotes so that you can ask questions about any loan terms that do not seem right as well as explore options that you might not have known were available otherwise.

When you have narrowed down your options to one or two potential lenders take the time to discuss your loan with each in depth so that you can get an idea of exactly what your final mortgage loan will be like. There is a required form called the Good Faith Estimate that your lender is required to provide; this form discloses all the fees and helps to determine both the cash required for closing as well as your final monthly payment. This will let you learn more about the specifics of each lender’s loan products and will help you to choose the mortgage loan that is best for you and your property.