Mortgage Lowdown

Terms could be deceptive at times. The best possible example of this kind is the term — cost and cash — getting confused in mortgage deals. Two terms are invariably used i.e. no-cost and no-cash. While both refer different things altogether confusion remains the common factor for many customers. 

But don’t get confused anymore with these similar "looking" terms. The confusion is considered to be one of the worst mistakes a borrower can make in a mortgage deal. Borrowers pay a higher interest rate on a no-cost mortgage. The lender finds that rate by estimating the costs for which he would be responsible, and then finding the interest rate that justifies paying those costs. Whereas in no-cash case, during closing, borrower does not pay the settlement costs, and the lender doesn’t pay them either. The costs are added to the loan balance, so the borrower pays them over time, with interest. Now you will get it right. Right?

A good credit score is of great help when you apply for a mortgage. The better your credit score, the easier it will be for you to get a loan. So, if your score is not too good and you want to improve it before you purchase your dream home, here are a few tips that will help you get your score back on track:

Pay your bills on time. Nobody likes people who ‘forget’ or delay repaying their bills. Late payments definitely have a big negative impact on your score. Did you know that if you delay payment on your bills by 30 days or more, it can lower your score by 50 points or even more. So, you realize how imperative it is that you pay off your bills as soon as you receive them. But if you cannot pay your bills for some reason like being tied down with many things or if you have a habit of forgetting, you can easily go online and automate your bill payment procedure. This way, you don’t have to worry about getting late. If you have too much debt and begin to fall behind or cannot see a way out of your financial mess, it probably is time for you to get credit counseling.

Never max: Never, never, never max your credit cards. Always try to keep your balance small. If you go on a spending spree, then you may realize that paying off all that money is no easy task. Then the cycle of endless debt sets in. Another of those avoidable activities is filing for bankruptcy. Bankruptcy is more negative than late payments or collection accounts. They will help you sort out a plan to repay your lenders without filing for bankruptcy.

The wait’s finally over as we now see long-term mortgage rates climbing strongly this week to their highest level in more than four years. The benchmark 30-year fixed-rate mortgage rose 12 basis points to 6.83 percent, according to a recent national survey of large lenders. Bankrate.com reports:

This week’s sharp rise marked the end of a watch ‘n’ wait period when mortgage markets seemed to be passing time until next week’s Federal Reserve meeting. The benchmark 30-year rate had remained bottled up between 6.67 percent and 6.73 percent from May 3 to June 14. That sessile period ended this week, when the mortgage market concluded that the Fed not only will raise short-term rates next week, but might boost again at its next scheduled meeting, Aug. 8.

Read more: Long-term mortgage rates hit 4-year high

This is an open secret so this survey in itself reveals nothing new — all it does is put this dismal fact in facts and figures, making it even more painful. A national study released recently found that a black borrower is more likely to be charged a high rate. A Hispanic borrower also was more likely than a comparable white to pay a high rate, the study found. Columbiatribune.com reports:

Consumer groups said the study by the Center for Responsible Lending offered the clearest evidence to date that minorities can face widespread discrimination when they shop for mortgage loans.

Read more: Mortgage loan study suggests lending bias

You’ve taken that loan to buy your dream home but are now tired of having to make a big payment every month. You have begun to realize that it is not such a good idea to have a loan balance hanging over your head all the time. You just want to pay off your mortgage as soon as possible. This will help you get a sense of security and freedom.

However, don’t let the temptation overwhelm you. You must be extremely cautions when attempting to pay off your mortgage early. One of the main things you should ensure is that your income is sufficient for you to repay the loan without falling into a debt trap. You should also have money for emergencies. One way you can pay off your mortgage early is by making biweekly mortgage payments instead of making one.

When you’ve zeroed in on your dream home and just want to buy it before it goes off the market, a mortgage loan comes in handy. You can possess the house asap and pay off the loan slowly. But as time goes by, you begin realizing that it is not such a good idea to have a loan balance hanging over your head all the time. You just want to pay off your mortgage as soon as possible. This will help you get a sense of security and freedom.

However, don’t let the temptation overwhelm you. You must be extremely cautions when attempting to pay off your mortgage early. One of the main things you should ensure is that your income is sufficient for you to repay the loan without falling into a debt trap. You should also have money for emergencies. Dailyindia.com reports:

One way you can pay off your mortgage early is by making biweekly mortgage payments instead of making one payment each month.

Read more: How To Pay Off Your Mortgage Loan Faster