“What’s Your Mortgage Rate?”

Here is the one question I get more than any other by typical home buyers shopping for a mortgage:

What’s your mortgage rate?

I get that a lot from mortgage shoppers that are not familiar with the mortgage process. It’s sort of like walking into a shoe store and asking “how much for a pair of shoes?” For the shoe salesman, the answer would depend on factors like, style, size, material etc.

It works the same with mortgages. Rates depend on factors such as loan size, the loan to value (how much you are borrowing in relation to the selling price or home value), and of course your credit score.

If you see an ad with a low mortgage rate in nice large font, ask yourself this question. How do they know anything about the home I’m buying, the mortgage I’m looking for, or what my credit profile looks like? There is no “one size fits all” when it comes to mortgage rates (or shoes).

If you see a mortgage rate advertised on the internet that seems too good to be true, trust your instincts, steer clear and have a conversation with a reputable mortgage professional. That’s the one way to determine the only rate that you should really be interested in, and that’s the rate that you’ll be paying.

Build Equity by Choosing The Right Mortgage

This savings account, better known as equity, can provide the means for putting your kids through college, dealing with emergencies and retiring.

Home ownership is the key to building wealth for most people because it is an involuntary savings account. As you pay down your mortgage each month, the value of your interest in the home rises.

Equity is a beautiful word as every homeowner knows. Once you get used to making your mortgage payments, you can rest assured that you are creating a nest egg every month. Throw in the appreciation on the property and your nest egg can grow large before you realize it. This savings account, better known as equity, can provide the means for putting your kids through college, dealing with emergencies and retiring.

Building equity is fairly simple. Just make your monthly mortgage payment. There are additional steps you can take to move the process along at a faster pace. These steps are all about the type of mortgage you obtain when you purchase your home.

When you purchase a property, particularly for the first time, it can be a stressful event. Right or wrong, most people tend to take anything they can get in a mortgage loan so they can meet the closing of escrow. This is understandable, but can come back to haunt you financially. If you can step back from the chaos for a moment, you might consider the following options that will help build equity.

A 30 year mortgage is the default for most home buyers. It is the first thing that comes to mind and most assume it is the safest option. A 15 year mortgage, however, is going to cut down on the total interest you pay on the loan as well as supercharge your equity growth. The 15 year loan is far better than a longer option, but only if you are absolutely sure you can meet the monthly payment requirements. If you have any doubts whatsoever, there is another option that you can consider.

Making prepayments on principal is a simple, proven way to build equity. The idea is to make an extra monthly payment when you have sufficient cash to do so. Effectively, you use your home as a savings account by doing this. The advantage over other investments is the equity growth should be tax free. Before taking this step, find out from your lender if there are any prepayment penalties. Regardless, making two of these payments each year will quickly build equity in your home.

If any of these ideas sound interesting, you can still take advantage of them even if you currently have a mortgage. Refinancing your mortgage gives you an opportunity to correct mistakes you made when you were more focused on getting through escrow. Talk with a mortgage professional to find out your options.

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