When looking for a mortgage, it is common to get too fixated on scoring the lowest interest rates. While the rates affect the monthly payment and the overall cost of the loan, they are not the only important consideration.
The mortgage term, type of interest rate, and payment structure all influence the total cost not just of the mortgage, but also of the homeownership.
This refers to how long you will have to repay the mortgage. The common loan terms are 30 and 15 years, but some lenders also offer shorter and longer terms like 10, 20, and 40 years.
Mortgage lenders in Salt Lake City note that if you want to own the home faster and reduce the interest you will have to pay over the life of the mortgage, you may want to consider a shorter term loan.
Type of Interest Rate
The two basic types of interest rate are fixed rate and adjustable rate. Fixed rate mortgages have an interest that will not change throughout the life of the loan. Adjustable rate mortgages (ARMs), on the other hand, have an interest that can fluctuate depending on market conditions.
This means that your monthly payment can increase or decrease. There is also the hybrid ARM, which combines the features of the two mentioned loans.
A typical loan payment is made up of four components: the principal, interest, taxes, and insurance (PITI). Note that you can also choose a mortgage that does not include insurance or taxes in the monthly payment, but pay them on their own.
- Principal – amount needed to pay the loan balance
- Interest – reward (in the form of money) given to the lender or mortgage company for letting you borrow money
- Taxes – government taxes you need to pay as a homeowner
- Insurance – property insurance and private mortgage insurance
Do not just look for a loan with low rates; consider the whole package to make sure that you are getting a good deal. Work with reliable lenders to know more about loan options and make a sound decision.