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Deciding Upon A Lock In Period For Your Mortgage
Posted by: | CommentsWhen a lender offers you a rate on your home loan, it is normally good for that day only. Unless you also close on that same day, which is unlikely, you have to take a chance on the interest rate being higher when you eventually close.
But lenders today frequently offer their clients a lock in period for their mortgage at the time of application. They recognize that the time between deciding on shopping for a home and actually finding and closing on it may take some time. They also recognize that borrowers don’t want to take a risk on mortgage rates increasing during the period they are shopping for their loan. Locking in a rate for a length of time frequently proves to be a good idea for a borrower. This applies to both interest rates and points.
This feature is typically available at the time of application, while the mortgage is being processed, or once it has been approved.
An example would be if a bank offered a lock in rate for thirty days at 5.5% interest with one point. Even if you close in a month, and rates have increased, you will still receive the 5.5% rate on the mortgage. This is a generally common lock in time that lenders offer to attract customers. Lenders are not usually willing to give such a guarantee for more than 30 days, with a greater chance of rates increasing, unless the borrower pays a premium.
Remember that the lock in period can turn against you if rates go down instead of up, unless your agreement permits you to break the agreement. You have make sure you negotiate such a feature in advance.
If your loan is not settled during the lock in period, it will expire and your new mortgage or new lock in period will be at the increased rate. If rates have not changed, you may be allowed to extend the lock in period.
Lock in periods can be a number of mixtures of terms, as we see:
Locked in Interest Rate with Locked in Points. The lender guarantees both the interest rate and the number of points for a set period.
Rate is locked, points are not. The underlying rate is fixed for the period, but the lender retains the right to change the points. The lender can charge additional points if they want to.
If interest rates are changing a great deal, it is probably a good idea to ask your banker about lock in terms.
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Here Is An Easy Way To Save A Bundle On Your Home Loan
Posted by: | CommentsWe all pay the same amount for our mortgage each month, so why not try this idea that will permit you to continue to pay the same amount, but saves you thousands of dollars on your mortgage? Not many homeowners realize how effortless this can be.
A two week pay check is the rule for most people. As we all know, things are usually easier in the beginning of those two weeks than at the end. Yet, if you examine your expenses, they seem to remain relativelyfairly fixed.
When we feel full of money, we pay the bills and buy the necessities and then bills that come in later may not get paid. The answer to this problem is to budget our money, and one of the most valuable and painless ways to do this is to pay your mortgage every two weeks rather than of once a month.
This is an easy solution that will save the home owner substantially, and have the added benefit of paying off the mortgage sooner. Here is a perfect example: if you had a 30 year, $80,000 mortgage at 7%, you can save more than $25,000 by paying your mortgage twice a month instead of once a month.
The trick is simply to budget home loan payments and pay half out of each paycheck, instead of all out of one. (Most people pay their mortgage at the end of the month, so it reaches the bank on the due date.).
There is no real enigma to this: as you pay your mortgage earlier and faster, you bring forward the eventual due date of the loan. Because of this fact, your total interest bill is less.
When you make a payment on your mortgage, the bulk of the payment is used for the interest and only a small part for the principal. While you are paying this small bit of principal, the interest accrues. But if you can speed up the amount of remittances, the principal portion that is paid starts to rise faster. The net result is that the principal is paid down ahead of term!
You may be able to get forms to make this extra payment, but if not, simply send the additional check in with your account number on it. Or you can make copies of your payment notification and send them in with the extra payment.
You pay exactly the same amount on your mortgage each month, but because you pay half of it ahead each month, you reap the dual benefit of saving tens of thousands of dollars in interest, and you will pay your mortgage off earlier.
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