When shopping for a mortgage in Windsor just the terminology alone can make your head spin. It’s enough to make you throw your hands up in the air and shout, “forget it, I’m renting forever.” Diane Bertolin and staff understand the frustration. Most homeowners are flustered by the dictionary of mortgage terms when they search for their first home too so there’s no need to stress. Start by learning a few of the most important common mortgage terms to learn what they mean and how they apply to you as you begin the search for a new home. Still, have questions? Reach out to us today and allow us to clear up any mortgage term questions you may have. Let’s go through the definitions together in an effort to put you on the road to homeownership!
Adjustable-Rate Mortgage (ARM)
Commonly referred to as an ‘ARM,’ the interest rate fluctuates per the market interest rate with this type of mortgage. When the interest rate goes up or down, the amount a borrower pays also fluctuates. This keeps the amortization period the same. Borrowers that do not want to be locked into an interest rate and can realistically afford to pay their monthly mortgage in Windsor despite fluctuating interest rates should only consider this option. When market interest rates hit all-time lows, this is a good time to consider an ARM.
Most borrowers prefer to know what they will be paying on their monthly mortgage. If this sounds like you, a fixed-rate mortgage is your best option. The downside is unlike an ARM, you won’t get the lowest interest rate possible on your mortgage. This means that some months you could actually be paying more per month than you would be with an ARM. Decide what’s most important: getting the best deal some months or being able to budget your monthly mortgage.
A Home Equity Line of Credit (HELOC) is the only loan you can apply against your home. Some homeowners use this as a second mortgage to consolidate debts or pay off expenses such as a home remodel. It’s arguably the best personal line of credit any homeowner can use and can be a lifesaver when life throws you one of its many proverbial curveballs. To open a HELOC, homeowners must have at least 35% of the equity in the home.
The maturity date is merely the end of a mortgage’s term (e.g. 30-years passing on a 30-year fixed-rate mortgage). When this happens, a borrower must decide where to go from here if there is still a balance on the mortgage: pay off the rest of the principal or renegotiate the mortgage based on current market interest rates.
When it comes to a high-ratio mortgage in Windsor, lenders mostly see this as a higher-than-usual risk. Thus, they require mortgage insurance. If a borrower defaults on their home loan, the mortgage insurance will protect the lender from losing a substantial amount of money. It’s a way for them to protect their bottom line and allow the borrower to have an opportunity to get a home mortgage.
Still, have questions about mortgage terms? I want to speak to you. Reach out to me today, and let’s clear up any confusion you may have about mortgage definitions and what we can do to help you to finally own your own home. Let’s chat.