Applying for a home loan can be difficult and daunting. To make things easy for the future homeowner, he has to have the services of professionals. These include real estate brokers and finance professionals who specialize in mortgages. Specialization trickles down to location, like mortgage officers in Tempe.
Like the realtors, a mortgage professional that has a good understanding of the land and its laws would be in a good position to help the buyer.
Rates and Services
There are two major kinds of mortgages based on the interest rates. There is the fixed rate mortgage and the adjustable rate.
The lending institution usually has mortgage plans for the borrower to choose from. There are advantages for each type, and it all depends on how the borrower would be able to repay the loan amount. A fixed interest rate does not change for the repayment period.
If the loan term is for 15 years, the interest does not change for the whole period.
Adjustable Interest Rates
Adjustable interest rates, also called adjustable rate mortgage (ARM), have variable rates for any given period. The lending institution does not set the rate itself, but rather base them on a benchmark interest rate, with an additional spread called the ARM margin.
The first few years of the mortgage is usually paid on fixed interest, and the succeeding years will be adjustable.
The mortgage uses two numbers, the first is the number of years for a fixed mortgage, and the second number denotes the length of time for the adjustable rate mortgage or the length of time between changes in the interest rate.
The interest rate is dependent on the Treasury Bills maturity rates, common fund indexes, or some other well-known authoritative floating index or interest rate. There are also rate caps to make sure that the mortgage interest rate does not go too high and unaffordable.
For a better appreciation and understanding of interest rates, the borrower should discuss this with the lending or financial institution. When borrowing money for a home, it is best to understanding everything before signing the mortgage.