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Important Home Mortgage Information

May 31, 2008
Completing your research and having home mortgage information at hand before applying for your home mortgage loan can save you a lot of money over the term of your home mortgage loan.

Your interest rate and total payments on your home mortgage are very important things to look at when working out the financing for your new home. Many people pay more than they have to because they did not take the time to do a little research before entering into a contract for their home mortgage.

This is home mortgage information that you need to know. There are two basic major types of home mortgages that are available. One is a fixed rate mortgage which involves a fixed amount of payment of principal and interest for the entire term of the loan. This means that regardless of economic conditions, one has to pay a certain fixed amount of money to the lender for each payment period.

Another basic type of home mortgage is the adjustable rate mortgage. This is an loan arrangement which allows your payment to be pegged to economic indicators such as those of the Fed funds market or to the prime rate. Some adjustable rate mortgages are based upon the more volatile LIBOR rate so you should be alert for this term. An adjustable rate mortgage with no cap based upon LIBOR rates may reach much higher levels than you anticipate at the time of your loan closing.

The use of any adjustable rate mortgage means that your interest rate payments can go up or down depending on the performance of the entire economy. Adjustable rate mortgages usually start out with lower interest rates than fixed rate mortgages (because of the risks involved in the adjustable rate mortgage moving to the upside). However, after an initial period of a year or two the adjustments to rates can be extreme. You must be aware of this and be prepared to pay much higher mortgage payments when the rate adjusts.

During the last few years, we probably have had the lowest interest rates for the last 50 or so years. This has been favorable for most home mortgage payees, but it is also an indicator that for the next few years, that interest rates will probably go up.

Remember that total interest paid will increase considerably for longer term mortgages. This is critical home mortgage information to understand. The longer the term of your loan the more interest payments you will make. You might be amazed how much you really pay for your home once interest payments are factored in. The shorter time it takes you to pay off the home mortgage the less you pay for the house.

Interest rate movements can be very dynamic. Having a strong view towards interest rates movements can determine your position in taking out a mortgage. If you believe that rates are bound to go up, then you will probably be better off availing of a fixed rate home mortgage. If one believes that rates are bound to go down, you might consider an adjustable rate home mortgage to take advantage of the movements. Then at or near the bottom of the interest rate cycle you could refinance with a fixed rate mortgage.

Having a good sense of interest rates and their movements can save one a lot of money. Ask your lenders about the different schemes and calculate how much you are would pay for each type of arrangement. Then weight the risks and potentials of the movements of the interest rates and choose the best payment scheme.

Having good home mortgage information at hand is the key to locking in the right type of mortgage. Taking your time and carefully researching home mortgage information can pay off every month over the term of your loan as you make your mortgage payments.
About the Author
Gerald "Taipan" Greene is a retired forex trader and portfolio manager who worked in Asia for over 20 years. The nickname was acquired in Hong Kong and is now used for a number of financial, political, and Internet business related blogs. One of them is at Home Loan Services
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