Once you have your mortgage loan sanctioned, you have to
work at repaying the loan. It is possible for you to buy down your mortgage
loan for the first few years by paying a bulk amount to the lender. However
this is advisable only if someone else pays this fee for you as it is not that
advisable to buy down your own mortgage.
Instead, you could place this money in your savings
account, gain some interest and use the money to pay for your mortgage payments.
Remember that points tend to decrease your interest rate where a point is equal
to a percent of your mortgage loan.
You can find out how much you save every month with the
lowered interest rate against the rate without any points. This number has to be
divided into your points, with which you find out how many months you require
to pay off the loan.
Monthly property taxes and home insurance If your
mortgage loan is for an amount that is more than 80% of the value of your new
home, you may have to pay monthly property taxes and home insurance to the
lender. The lender will then pay the tax assessor and insurance company on your
behalf after which you’re monthly PITI is changed annually with the fluctuations
in annual taxes and insurance.
Lenders may also collect a reserve amount ranging between
2 to 8 months of tax and insurance from you. With this reserve amount or escrow
account, your closing costs are increased. And this reserve amount depends on
when you pay and the due date of your annual tax.
Prepayment penaltiesFixed rate mortgage lenders usually
keep a hedge against the fall of interest rates in the form of prepayment
penalty. According to this term, if you repay the mortgage loan amount within
one to five years, you will have to pay the mortgage loan lender an additional
six or more months’ of interest too.
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