Ray Torres asked:


When my dad bought his home, he went for a 30 year home loan. As a matter of fact, most of the homeowners I know have acquired their home via that home finance offering. But why it has being so popular over the years?

A 30 year home mortgage used to be the first choice of most borrowers, because since the total payments are spread over a longer period of time with the interest rate set for the entire time of the mortgage’s life. 30 year home loan rates are an industry standard but is it the right choice for you?

As we mentioned, the plus side for a 30 year home loan is lower monthly payments. This attraction is somewhat dimmed by the fact that you pay thousands of extra dollars in interest. But, on the other hand, your interest is 100% tax deductible which does lower your after tax cost at the end of the equation. It also offers you some flexibility so that if your financial situation changes and you have more money you can pay it off in less than 30 years, this while keeping the low monthly payments. The fact that your payments might be smaller gives you the option to purchase a larger roomier home.

To show an example of the interest difference between 30 year home loan rates and one of the other rates. On a 30 year, 100,000 dollar loan using 7% interest rate your monthly payment of interest and principle would be $665.30 dollars. Over the next 30 years you will have paid $139,511.04 in interest alone. Now with a 15 year home loan rate on the same amount you will pay $871.11 per month and over the next 15 years, you would pay $56,799 in interest. This would save you $82,712 dollars.

If you have the will power to invest the savings from the monthly payments, it still could be a good choice to go with the 30 year mortgage. Especially if you can find an investment that the long term payoff matches or exceeds what you would save in a 15 year mortgage. Another factor to consider is how fast you want to accrue equity in your home or to own it out right. 30 year home loan rates take much longer to build equity.

30 year home loan rates are certainly attractive and the vast majority of home buyers get 30-year loans because that is the longest home loan available today. Experts agree if they could get a 35- or 40-year loan, they probably would. There are many other options to consider. Probably the biggest question you have to ask yourself when considering a loan is what are your financial goals? What loan plan will help you the most to reach that goal? It is clearly to your advantage to look into other loan options for the best loan available for you and your financial goals. It may surprise you that because of your personal situation there may be other plans more suitable for you, such as a 15 year mortgage, for example.

Before committing to a long term loan, have a clear idea of your financial goals, chop around for alternatives from different lenders and if possible, seek professional financial advice on what best for you. It will be time and resources well spend.



CARLTON

Lender411 asked:


If you thought finding just the right home was an important decision, you are thinking of only half the transaction! As a matter of fact, while the right home is a crucial aspect of any real estate transaction, finding the right home loan with which to finance it is just as essential. Pick the wrong loan, and you may find that in a few short years your dream home will no longer be affordable; pick the right loan, and the payments will be easier to keep up with!

In the most basic terms, a home loan is little more than the amounts of money you need to borrow from a lender in order to buy the home you have picked out. It is typically the difference between what the house costs minus the down payment funds you have sitting in your bank account. Usually the loan amount is a pretty hefty chunk of money, and borrowers need to think through the terms they foresee being able to afford not just in the short term, but also in the long run. Since loan terms are generally measured by decades, it is of the utmost importance that you think very carefully before shopping around for a loan product.

The first question that more often than not needs to be answered is whether you want to apply for a fixed rate mortgage or instead opt for an adjustable rate loan (commonly abbreviated as ARM). Fixed rate loans are conservative in their risk; the interest rate never changes and the payment will remain consistent throughout the life of the loan. Adjustable rate loans start off with a much lower interest rate, but over the term of the loan the interest rate gradually creeps up and before long it might surpass the interest rates charged on fixed rate loans.

Fixed rate loans are perfect for borrowers who want payment predictability they can bank on. The interest will never adjust upward – even if the economy changes drastically – and the payment is the same over the life of the loan. This makes budgeting a lot more realistic. Since banks are the ones who are taking the risk for issuing loans at interest rates that may be surpassed any time soon by the economy, they usually charge slightly higher rates than they would for adjustable rate mortgages. Future homeowners who are looking for a long term home and do not foresee moving any time soon will do well to give these loans a good look.

Adjustable rate mortgages are for the homeowner who is somewhat of a gambler at heart or who is not thinking long term when purchasing a home. For those anticipating to only keep their home for three, five or seven years, an adjustable rate mortgage that offers a lower interest rate during that period of time might be a great way to accomplish homeownership and save money on the loan product. It becomes problematic if you change your mind midstream and decide to keep the home but the loan continues to adjust upward with respect to the interest rate. The uncertainty about the changing interest rates and payments makes it harder to budget.

An amazing but risky third option that seems to combine aspects from both a fixed loan and an adjustable rate mortgage is the balloon loan. These loans are dicey but could save you a lot of money. Initially the balloon loan will have a very low interest rate – much like an adjustable rate mortgage – but it will remain steady and unchanged, like a fixed rate mortgage. After a predetermined period of time, commonly seven to 10 years, you are required to pay off the entire outstanding balance which is a huge sum. Although you could refinance your home at that time, it is essential to remember that you need to qualify for the refinance loan in the first place! Since economic climates are subject to change, there is no guarantee that this process will be as easy in seven to 10 years as it is today. You can find out about these and mortgage and refinance rates on our site www.lender411.com.



DOMINGO