Mortgage lenders offer numerous types of mortgages, and a buyer’s long-term goals and financial circumstances will determine which mortgage suits him or her best. Many people intend to remain in their home for decades; whereas others invest in the short term to advance up the property ladder. Both mortgage lenders and buyers have to invest considerable effort into finding the right loan that works for all parties concerned.
These days, the thirty year and fifteen-year mortgage are the two most popular loan terms. Borrowers who choose a thirty-year mortgage agree to pay back the money borrowed, along with any interest, in 360 monthly installments, or three decades from the loan date. Borrowers who choose a fifteen-year mortgage agree to pay back the money borrowed, along with any interest, in 180 monthly installments, or a decade and a half from the loan date.
Of course, loans with longer repayment terms require lower monthly payments. The downside to this arrangement is that borrowers pay more interest over the course of the loan, compared to loans with shorter terms. Notwithstanding, the majority of borrowers base their decision on which monthly payment they can most easily afford.
The phrase ‘mortgage pipeline’ refers to a collection of loans, which have been verified by a mortgage lender – but which have not been financed yet. Once each loan is financed, or the borrower rejects the agreement, the loan is taken out of the pipeline. Usually, mortgage lenders work with third parties to file and complete all the required paperwork to get mortgage agreements ready for prospective borrowers.
Some of the other common phrases related to mortgages are ‘points’, ‘APR’ (annual percentage rate) and ‘closing fees’. These are negotiable, as are several other charges. The most attractive mortgage adverts are not necessarily the best value, because of potential hidden charges. According to experts, the best way for buyers to gauge which loan is least expensive is to compare the different APRs. This is because, by law, all charges have to be included in these calculations. Frequently, APRs are not openly advertised, so buyers have to request this data.