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Mortgage newsletter 52


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A guide on choosing between terms in a mortgage when purchasing a home or refinancing one. There are many things to consider other than interest rates.

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Mortgage newsletter 52

  1. 1. Mortgage Housing Loan TIP OF THE MONTH “Get a in-principle approval mortgage to confidently make a buying offer when you finally find dream home” What to Look for in a MortgageIf you already know that you have good credit, you will have a host of In This Month’s Issueloan options to choose from. Lender could in fact be chasing you. Butto make sure that you have the best deal available, you have to look atclosing costs and the costs of financing. Page 1: What to Look for in a MortgageFinancing Costs Page 2: A Key QuestionThe most common type of mortgage are pegged to a floating rate. Insome places, these are called adjustable rate mortgages. For more When You Get Yourtransparency, it would be a good idea to get one that is pegged to a Mortgagepublicly available index rate.Fixed-rate home loans are also popular as they can give borrowers a Page 3: Choosing a Shortcertainty on the costs that they will incur. For hardcore personal Term Home Loanfinance planners, this allows them to plan their finances to the exactcent. If mortgage rates dive in future, they have the option torefinance to a lower rate as well.For floating mortgages, borrowers usually will incur lower interest during initial years of the loan whilerates will rise in future. This is suitable for investors with a shorter exit strategy. Home buyers who fullyexpect to relocate in a few years will also find these packages favourable to their situation. ~1~
  2. 2. Loan tenorThe shorter the tenor of your mortgage is, the lesser you will have to pay in accumulated interestcharges. You will expect to be making a higher monthly repayment though. A lot of home buyers take upthe maximum tenor they are allowed to. But depending on your personal financial circumstance, decideon a tenor that makes most financial sense to you. If you have no use for extra cash, saving on interestcharges by taking up a shorter tenor can be a good move. Lenders Mortgage rates can vary greatly from lender to lender. So it is in your best interest to get at least 3 different quotes from 3 different lenders to make a property comparison. When you have decided on a lender, ask if there any terms that you have to adhere to when accepting their mortgage offers. Sometimes, good deals require you to also buy mortgage insurance together with your loan. You might also be asked to put up a time deposit with the bank for a certain amount up to a certain amount of time. You always have the option f walking away if you are not happy. A Key Question When You Get Your MortgageWhether you are refinancing or purchasing a property, interest rates are no the only thing that mattersin a mortgage. Your decision has to also based on your personal plans and financial objectives. Here aresome questions to ask yourself.How long do I plan to stay here?It could be a straight forward answer to a lot of people. But for those who travel and relocate often, thisquestion can be a real deal-maker or deal-breaker.The answer can influence which types of mortgage is most suitable for you. ~2~
  3. 3. Choosing a Short Term Home LoanIf you have the intention to sell off your property in a few years, mortgage loans with low initial interestrates will definitely appeal to you even with high closing costs. But for long term property owners, thechoice would be obvious as well.Mortgage loans with lower initial rates will allow you to pay a lower interest rate and it also means alower monthly payment as well. This will play nicely into your plans if you have already decided that thisproperty you are buying is for a short term stay, Floating interest rates are usually lower than fixed rates because lender assume that you will only hold onto the property for a relatively short period of time. This means that they do not have to worry about being stuck with a low rate mortgage over the long term like 30 years. This is also why fixed rates are usually higher as lenders are mindful that giving you a low fixed rate could mean huge opportunity costs in future should interest rates rise. The risk of floating rate mortgages among mortgage issues is that index rates fluctuate. And they can rise to levels that you are unable to afford. The good thing is if you are looking at a short term investment horizon, you are limiting your costs as you will be letting go of the property soon. If you really have to take up a fixed rate mortgage for stability and assurance, at least take up one with a short lock in period so that you will not incur a hefty penalty fee when you sell your property after a few years. ~3~