You must have been advised in the past, when applying for a mortgage as to all the dos and don’ts. But now it’s time for you to be in the driver’s seat and take charge of this round of Q and A and make sure you extract as much pertinent information as you can from your mortgage officer before buying a house. While customers are expected to jump through the highest hoops in order to impress their mortgage officer, their mortgage officers are not as forthcoming with information as their clients are expected to be. Here is a list of questions that we feel you should get out of the way prior to settling on a particular lender.
Questions To Ask Your Lending Officer
Some of the important questions you need to ask your lending officer about your home loan may involve:
- The Terms Of The Loan: It is best to start the application of with this question. It is always beneficial to understand the terms of the mortgage upfront rather than wait and be surprised with something that you should have cleared up at the very outset. Ask questions like, what are the terms of the mortgage, what is the interest only period, what are the undisclosed charges that could apply to this loan structure etc.
- Can I Pay Off The Mortgage Early?: Often consumers feel that there are no penalties, which apply to paying off their mortgage early. This could be a mistake. Quite often you will find that your mortgage provider will charge you penalty interest for paying off your mortgage early.
- What Interest Rates Are You Looking At: If you are looking at getting yourself a fixed interest mortgage loan, then it is easy to figure out what your payments are going to be now or a future date. If however, you decide to brave the market and get yourself a variable loan, you might want to quiz your mortgage officer on the kind of range you might be looking at with regards to interest rates and payments.
- Principal And Interest Break Ups: Another thing that you might want to figure out is what is the principal and interest break up. You may want to ask your mortgage officer as to how much of your repayments go towards the principal component and how much goes towards the interest component. The reason this should be of interest to you is owing to the fact that you should want the majority of your payments to go towards the principal component thereby reducing your overall interest payments.
- Other Factors: In addition to the aforementioned questions you would should also ask your mortgage officer questions like, if there re any closing costs. These are hidden costs and are sometimes added over the above the general costs associated with getting a mortgage. It is always beneficial to have these factors cleared up front as you find yourself short on the day of settlement. Further you should also enquire whether it is possible for you to get a fixed mortgage. If you can qualify for one, ask your mortgage officer to explain the terms and conditions of a fixed mortgage.
These are some of the questions you might want to ask your mortgage officer prior to settling down on a particular lender. As with any investment it is very essential that you do your research adequately.
References:
- Ten Questions to Ask Your Mortgage Officer – Fine Tuned Finances
- 10 questions for lenders – BankRate
- Ask the Lender the Right Questions – Yahoo Finance
Every now and then individuals ponder on how to pay off their mortgage loans faster. Lets face it, every individual would like to lead a debt free life and your mortgage is one of the most important debts you will acquire in your life. Being able to pay off your mortgage early is not only beneficial because you have gotten rid of a major debt but also because it will open up a lot of investment avenues for you. Below mentioned are a few tips top help you may your mortgage off sooner.
Take a look at the diagram above. In this scenario when the home equity mortage loan was taken out, the entire house was valued at $500,000. The consumer contributed $100,000 towards the purchase of the property and borrowed the remaining $400,000. Now let us take a look at the value of the property value and the loan situation after 5 years:
In this case after valuing the property after 5 years the value has increased to $750,000 thereby giving the consumer equity in the property of $350,000. The client can borrow against this equity. Once the client approaches a bank or a lender, the lender will value the equity property and will calculate the equity the client has in his/her property in the same way will lend funds against that amount. This new lend will create a second or a third mortgage on the property as the case may be. It must however be remembered that equity in a property is not always positive. It can in a lot of cases during a market downturn as we have just experienced, be negative. Consider the above example, if after valuing the property after 5 years, the value had fallen to $350,000 from $500,000, the client would have negative equity in the property of (350,000-400,000 = – $50,000) negative $50,000.