Mortgage Information

Different lenders offer different rates, so it pays to shop around. You can also use a mortgage broker. They can sometimes offer better rates than you can find yourself, and will help you work through your options.

There is a wealth of mortgage information available online, including rates, so do your research.

Adjustable Rate Mortgages (ARM) An ARM is an adjustable rate mortgage - a loan whose rate is fixed for a period of time (1, 3, 5, or 7 years), and then varies according to federal interest rates. ARM's usually offer a lower rate then fixed rate mortgages, and are generally a better deal for homeowners who plan on selling their house within 5 years.

Beware ARMs with "balloon payments," which require you to make a large lump sum payment when the fixed rate period comes to an end.

With all mortgages, your interest rate will vary depending on your credit, and it pays to shop around to get the best deal.

Closing Costs Closing costs are fees you pay to complete the transaction of securing your mortgage and buying your home. These include legal fees, taxes, realtor's fees (if any) and a variety of fees your lender will charge you to process the loan, including "points." Some closing costs are negotiable, and can be waived all together (usually those fees charged by your lender).

When applying for a mortgage you should always get an estimate of closing costs before you commit to any mortgage provider. Mortgage providers and mortgage brokers are required by law to give you this estimate.

Points Points are prepaid interest your pay your mortgage lender to reduce the interest rate of your loan - the lender gets their money upfront, and thus you save over the long run. A rule of thumb is it usually takes five years of interest savings to recoup the cost of paying one point on your mortgage. Some points are 100% tax deductible, which makes paying points on your mortgage more attractive.

Home Equity Line of Credit (HELOC) A home equity line of credit is a credit account backed by the equity in your home. A home equity line of credit works much like a credit card - you can apply the funds to anything you want: home improvements, car payments, college loans, etc. The main difference is that with a home equity line of credit, your house is at risk if you default in payment.

Interest on a home equity line of credit is usually tax deductible, so this can be a good way to consolidate dept, or pay for needed home improvements. Like any home loan, it pays to shop around, so do your research online where rates and fees are publicly available.