Rarely are people able to actually pay cash for their home. It's a wonderful idea, but most of us have to get a loan and make monthly mortgage payments. If you are ready to dive into the real estate market for the first time, here are some helpful facts concerning mortgages that might be of interest to you.
Your mortgage payment is divided into two parts, even though you write the check to just one entity. A portion of the monthly cost actually reduces the amount you own on the loan, and the other part is paying off interest on the loan. How much you pay for each chunk depends on your loan type and your rate of interest. In the early years of loan repayment, you might see that a large portion of your payment is used only for interest, but as time progresses, more of this monthly cost will go toward paying off the premium.
There is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
There also are variable rate loans. This means the rate of interest you pay can vary from year to year. The most common variable rate loan is called a 5/1 ARM. This means for the first five years of the mortgage, the rate is fixed. After that it adjusts every year. The advantage of a 5/1 ARM is that generally the initial rate is lower than the rate for a 30-year fixed loan, which means your monthly payment will be lower. If you sell the house or refinance the loan into a fixed-rate mortgage before the arm adjusts and potentially goes much higher, this can be a great deal. Otherwise, you risk having your mortgage cost go up and up and up every year, which certainly can happen and this can mean you spend hundreds of extra dollars each month.
When you buy a home, most people must come up with a down payment amount, but that is not the only expense that you will incur. While the person selling you their home will pay for the realtors' commissions, you will have to pay for home inspections and sometimes a home appraisal. There are also costs associated with getting a loan in the first place, such as a loan origination fee. You must pay to have a credit report run and you will have to pay for title insurance and other odds and ends. Sometimes you can see if a seller is willing to pay for some of these items or you can ask your lender if it can be rolled into your home loan as it might be easier to pay a little bit more each month than a big chunk when you buy the home.
Buying a home can be very stressful, especially if you have never done it before so it is wise to select a realtor with a great deal of experience. This is a trusted professional that can help explain many of the costs and details that most of us simply just don't understand. Of course, your realtor also can find a great home that suits your needs, tastes and budget. Contact the realtors at Nixon Real Estate if you are looking to settle anywhere within Texas Hill Country. If you wish to buy Fredericksburg real estate, San Antonio real estate, Kerrville real estate or a home anywhere in the region, they can help you with the entire process.
Your mortgage payment is divided into two parts, even though you write the check to just one entity. A portion of the monthly cost actually reduces the amount you own on the loan, and the other part is paying off interest on the loan. How much you pay for each chunk depends on your loan type and your rate of interest. In the early years of loan repayment, you might see that a large portion of your payment is used only for interest, but as time progresses, more of this monthly cost will go toward paying off the premium.
There is more than one kind of mortgage loan and there are positives and negatives to each and every kind. A fixed-rate loan is one option, and this means that the rate of interest remains the same throughout the entire loan schedule. The two most common types of fixed loans are a 30-year-fixed and a 15-year-fixed. This simply means at the end of 30 or 15 years, you will have paid off the loan and will own the home free and clear. With a 15-year loan, your monthly payment will be higher because you are paying more off the principal each month. If you can afford this type of loan, you can pay off your home twice as fast, but often this monthly payment is too high for many people.
There also are variable rate loans. This means the rate of interest you pay can vary from year to year. The most common variable rate loan is called a 5/1 ARM. This means for the first five years of the mortgage, the rate is fixed. After that it adjusts every year. The advantage of a 5/1 ARM is that generally the initial rate is lower than the rate for a 30-year fixed loan, which means your monthly payment will be lower. If you sell the house or refinance the loan into a fixed-rate mortgage before the arm adjusts and potentially goes much higher, this can be a great deal. Otherwise, you risk having your mortgage cost go up and up and up every year, which certainly can happen and this can mean you spend hundreds of extra dollars each month.
When you buy a home, most people must come up with a down payment amount, but that is not the only expense that you will incur. While the person selling you their home will pay for the realtors' commissions, you will have to pay for home inspections and sometimes a home appraisal. There are also costs associated with getting a loan in the first place, such as a loan origination fee. You must pay to have a credit report run and you will have to pay for title insurance and other odds and ends. Sometimes you can see if a seller is willing to pay for some of these items or you can ask your lender if it can be rolled into your home loan as it might be easier to pay a little bit more each month than a big chunk when you buy the home.
Buying a home can be very stressful, especially if you have never done it before so it is wise to select a realtor with a great deal of experience. This is a trusted professional that can help explain many of the costs and details that most of us simply just don't understand. Of course, your realtor also can find a great home that suits your needs, tastes and budget. Contact the realtors at Nixon Real Estate if you are looking to settle anywhere within Texas Hill Country. If you wish to buy Fredericksburg real estate, San Antonio real estate, Kerrville real estate or a home anywhere in the region, they can help you with the entire process.
About the Author:
Pammy McGrath loves reading real estate blogs. If you are looking for licensed Fredericksburg TX real estate agents, or to find Fredericksburg Texas homes for sale, please visit the NixonRealEstate site now.
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