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Choosing the right mortgage for your home

More often than not, selecting the best type of mortgage that best suits your requirements is difficult.

One best type is not always best for everyone. It is dependent on your needs and your capacity to meet your monthly obligations. In addition, you need to consider that there are various types of loans, different terms and conditions, interest rates, and number of monthly payments

You have to understand, examine, and weigh a mortgage loan and its consequential components which are part and parcel of this type of transaction.

For instance, are you planning to live in this house? If you are, how long? Will you stay in your house for 5, 10, 15, or 30 years?

The number of years you intend to live in the home will help you in choosing which type of loan to apply for. If you plan to stay for 5 years, it would be best if you defer buying it at all. However, if buying a home is a must and is mandated by certain personal or family consideration, then you may opt to apply for an adjustable rate mortgage or ARM. But if you are going to stay longer than 5 years, it is better to arrange a fixed rate mortgage.

If you wish to have an exact idea of how much will you be paying a month, fixed rate mortgage will solve that problem for you. But with this arrangement, you will definitely incur a higher interest rate. In order to avail of lower interest rate, you may start with an adjustable mortgage, though this depends on how much are you eager to take the risk of fluctuating interest rate.

Another component to consider is your financial standing in the future. If you could foresee a good financial outlook in the coming years and there would be an increase in your earning capacity, it is better for you to avail of a graduated payment mortgage. Otherwise, a fixed rate mortgage will be an option for you because of its cost predictability.

The next component to tackle is the availability of your money to cover down payment. Most lenders will not require you to get a mortgage insurance if you can afford a higher down payment percentage, letís say about 20%. This will definitely lower your monthly cost. Make sure you have available cash for down payment, closing fees, and donít forget, moving in expenses.

Now, if you already have chosen the type of loan to avail, the next step would be to select which lender to transact with. First, compare lendersí mortgage rates by looking at the annual percentage rate. This will show the cost of annual credit rate. Be wary of hidden fees.

You must secure a written guarantee of the commitment period of the interest rate from your future lenders. Donít accept verbal quotations to avoid problems in the future. Finally, ask the lender of the timetable of the release of loan approval. This is important because any delay in fund releasing might cause you to lose your dream house to another buyer.

Choosing the right mortgage for your home is not an easy task. But with the help of a little research, plus your desire to achieve your goal, you will be able to select the right mortgage for you and the lender that best suits your needs.

Ma. Roma C. Agsalud

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