Mortgage Rates and Truths Loaners Need to Learn
Loaning processes can be confusing if some technical terms are unclear. Here are some commonly used terms in the business of mortgage loans. Next time you contact a Dallas mortgage firm, it can be much quicker when you know how it works.
A mortgage firm speaks of "thirty-year fixed rates ranging from 5.5% to 5.8% with zero discount points and zero origination fee". There are five distinct terms here—"thirty years", "fixed rates" and the percentage range and discount point and origination fee. Thirty years is the typical duration of the amortization period or the time that the mortgage is completely paid for. "Fixed rate" means that the rate and payment does not change for the duration of this period.
Discount points and origination fees are the same thing; these pertain to pre-paid interest. This is the amount that the borrower is willing to pay in exchange for a lower interest rate. One discount point is 1% of the entire amount of the loan. However, a Dallas mortgage firm may warn borrowers about discount points and low interest rates; there is a high probability that the rate is not necessarily in the favor of the borrower.
There are mortgage firms that advise borrowers to assess how much they are paying for. Ask yourself how long you shall stay in the house, the cost of the discount points in cash, and the difference between the interest rate with and without points. The length of time you mean to stay in the house can be a gauge whether your mortgage plan is a good deal or not.
For example, a total loan amount is $150,000 for thirty years; the interest rate is 6.25%, costing the borrower $923.56 regularly. If the borrower gets the mortgage loan with one discount point, the interest goes down to only $899.33. This sounds good if the minimum length of stay in the house is three years; under a mortgage fee of $150,000, the discount point is $15,000. If the $15,000 is periodically paid for every month, divided by the $24.23 saved from the original interest rate, this means that the borrower would need to stay in the house at least 62 months or 5 years to pay for the mortgage and the lower interest rate.
This is good, but if the mortgage borrower is going to stay in the house for only three years, this is practically paying more than necessary because this allows less flexibility than the mortgage without the discount points. Even then, Dallas mortgage borrowers are also advised to watch out for inflation and fluctuation in rates. This can change interest rates and discount points too.
A mortgage firm speaks of "thirty-year fixed rates ranging from 5.5% to 5.8% with zero discount points and zero origination fee". There are five distinct terms here—"thirty years", "fixed rates" and the percentage range and discount point and origination fee. Thirty years is the typical duration of the amortization period or the time that the mortgage is completely paid for. "Fixed rate" means that the rate and payment does not change for the duration of this period.
Discount points and origination fees are the same thing; these pertain to pre-paid interest. This is the amount that the borrower is willing to pay in exchange for a lower interest rate. One discount point is 1% of the entire amount of the loan. However, a Dallas mortgage firm may warn borrowers about discount points and low interest rates; there is a high probability that the rate is not necessarily in the favor of the borrower.
There are mortgage firms that advise borrowers to assess how much they are paying for. Ask yourself how long you shall stay in the house, the cost of the discount points in cash, and the difference between the interest rate with and without points. The length of time you mean to stay in the house can be a gauge whether your mortgage plan is a good deal or not.
For example, a total loan amount is $150,000 for thirty years; the interest rate is 6.25%, costing the borrower $923.56 regularly. If the borrower gets the mortgage loan with one discount point, the interest goes down to only $899.33. This sounds good if the minimum length of stay in the house is three years; under a mortgage fee of $150,000, the discount point is $15,000. If the $15,000 is periodically paid for every month, divided by the $24.23 saved from the original interest rate, this means that the borrower would need to stay in the house at least 62 months or 5 years to pay for the mortgage and the lower interest rate.
This is good, but if the mortgage borrower is going to stay in the house for only three years, this is practically paying more than necessary because this allows less flexibility than the mortgage without the discount points. Even then, Dallas mortgage borrowers are also advised to watch out for inflation and fluctuation in rates. This can change interest rates and discount points too.
