Monday, May 2, 2011
Top 8 things to know about a mortgage
Deciding what type of home loan is best for your needs is an integral part of the home-buying process. But it’s not always easy. Here are the most important factors you should compare when shopping for a mortgage.
1. The principal
Your mortgage principal is simply the amount you are borrowing to buy your house. In other words, it’s the price of your new home minus your down payment. When you shop for a mortgage, each bank will tell you how much it is prepared to lend you based on your income and your credit score. This will help you determine how much house you can afford.
2. The type of mortgage
Traditionally, mortgages fall into two broad categories: Those with a fixed interest rate and those with an adjustable rate. With a fixed rate mortgage, you usually pay the same amount each month for as long as you carry the loan. These mortgages can mean less risk and less worry about the future, but typically have a slightly higher interest rate than the initial rates offered by adjustable rate mortgages. Adjustable rate mortgages (ARMs) usually provide you with a lower initial interest rate, but their rates change with the market, so there is always the risk that your payments will increase.
Lenders also offer other options, some of which combine the features of both traditional mortgage types. Some begin with a fixed rate for three or more years and then convert to an ARM. Others let you choose how much you pay each month. When you discuss these mortgage types, make sure you understand the pros and cons of the loan and that your lender understands both your risk tolerance and your level of financial discipline.
3. The interest rate
Interest rates are the most visible part of any mortgage advertisement, but finding the best deal isn’t as simple as looking for the lowest posted rate. A loan with a lower rate but higher closing costs -- more on those later -- may end up being more expensive. The best way to understand the overall cost of a mortgage is to look at its annual percentage rate (APR), which takes into account the interest rate and the loan’s other costs.
If you choose an adjustable rate mortgage, you also have to understand how your interest rate may change. ARMs are usually adjusted according to an index, which is a published interest rate set by a third party, such as the federal government. The lender then adds a “margin” to determine the interest rate on your loan. For example, if the index is at 5.5 percent and your margin is 1.5 percent, your rate will be 7 percent. Many ARMs have caps to protect you against drastic increases from year to year.
4. The monthly payment
One of the most important things when choosing a mortgage is to make sure you can comfortably afford the monthly payment. However, it’s not enough to simply choose the loan that provides you with the lowest payment. Interest-only mortgages, for example, carry the lowest possible monthly charges, but they do nothing to reduce your principal -- even after years of payments, you’ll still owe as much as you did at the outset. Also, because your payments on an interest-only loan may rise later, you should make sure you can afford the higher payments. In most cases, you’ll want a mortgage that also helps you build equity in your home. (Equity is the market value of your home minus any outstanding mortgages or liens.) If you don’t build equity, you may not be able to refinance if your house decreases in value. And, when you want to move to a new house, you can put the equity of your current home towards the down payment of your next home.
5. The term
The mortgage term is the number of years your loan will be active. Mortgages with shorter terms carry higher monthly payments, but they can save you a lot of interest over the long term. For example, if you borrow $150,000 at 6 percent with a 30-year term, your monthly payment will be $900. The same loan with a 15-year term will cost $1,265 a month, but you’ll pay almost $96,000 less in interest and you’ll own your home twice as fast.
6. Discount points
Lenders may offer you the chance to pay discount points to lower the interest rate of your mortgage. One point is equal to 1 percent of the principal, so on a $150,000 loan, each point costs $1,500. Generally, for each point you purchase you can lower your rate by about 0.25 percent. Whether this is a good deal depends on how long you plan to keep your home -- the longer you plan to stay, the more it makes sense to buy points. The LendingTree Discount points calculator can help you determine if it makes sense to pay points upfront when taking out a mortgage.
Your mortgage principal is simply the amount you are borrowing to buy your house. In other words, it’s the price of your new home minus your down payment. When you shop for a mortgage, each bank will tell you how much it is prepared to lend you based on your income and your credit score. This will help you determine how much house you can afford.
2. The type of mortgage
Traditionally, mortgages fall into two broad categories: Those with a fixed interest rate and those with an adjustable rate. With a fixed rate mortgage, you usually pay the same amount each month for as long as you carry the loan. These mortgages can mean less risk and less worry about the future, but typically have a slightly higher interest rate than the initial rates offered by adjustable rate mortgages. Adjustable rate mortgages (ARMs) usually provide you with a lower initial interest rate, but their rates change with the market, so there is always the risk that your payments will increase.
Lenders also offer other options, some of which combine the features of both traditional mortgage types. Some begin with a fixed rate for three or more years and then convert to an ARM. Others let you choose how much you pay each month. When you discuss these mortgage types, make sure you understand the pros and cons of the loan and that your lender understands both your risk tolerance and your level of financial discipline.
3. The interest rate
Interest rates are the most visible part of any mortgage advertisement, but finding the best deal isn’t as simple as looking for the lowest posted rate. A loan with a lower rate but higher closing costs -- more on those later -- may end up being more expensive. The best way to understand the overall cost of a mortgage is to look at its annual percentage rate (APR), which takes into account the interest rate and the loan’s other costs.
If you choose an adjustable rate mortgage, you also have to understand how your interest rate may change. ARMs are usually adjusted according to an index, which is a published interest rate set by a third party, such as the federal government. The lender then adds a “margin” to determine the interest rate on your loan. For example, if the index is at 5.5 percent and your margin is 1.5 percent, your rate will be 7 percent. Many ARMs have caps to protect you against drastic increases from year to year.
4. The monthly payment
One of the most important things when choosing a mortgage is to make sure you can comfortably afford the monthly payment. However, it’s not enough to simply choose the loan that provides you with the lowest payment. Interest-only mortgages, for example, carry the lowest possible monthly charges, but they do nothing to reduce your principal -- even after years of payments, you’ll still owe as much as you did at the outset. Also, because your payments on an interest-only loan may rise later, you should make sure you can afford the higher payments. In most cases, you’ll want a mortgage that also helps you build equity in your home. (Equity is the market value of your home minus any outstanding mortgages or liens.) If you don’t build equity, you may not be able to refinance if your house decreases in value. And, when you want to move to a new house, you can put the equity of your current home towards the down payment of your next home.
5. The term
The mortgage term is the number of years your loan will be active. Mortgages with shorter terms carry higher monthly payments, but they can save you a lot of interest over the long term. For example, if you borrow $150,000 at 6 percent with a 30-year term, your monthly payment will be $900. The same loan with a 15-year term will cost $1,265 a month, but you’ll pay almost $96,000 less in interest and you’ll own your home twice as fast.
6. Discount points
Lenders may offer you the chance to pay discount points to lower the interest rate of your mortgage. One point is equal to 1 percent of the principal, so on a $150,000 loan, each point costs $1,500. Generally, for each point you purchase you can lower your rate by about 0.25 percent. Whether this is a good deal depends on how long you plan to keep your home -- the longer you plan to stay, the more it makes sense to buy points. The LendingTree Discount points calculator can help you determine if it makes sense to pay points upfront when taking out a mortgage.
7. Lock-ins
When you apply for a mortgage, lenders will quote a specific interest rate and a certain number of discount points. However, the market can change while you are looking for your new home, causing rates to go up or down. That’s why it’s a good idea to ask your lender to lock in these rates for a specified period, often 30 to 60 days. If you want to lock in your rate, ask whether there will be a fee, if it is refundable, and get the agreement in writing.
8. Closing costs
Lenders charge several fees when closing mortgage deals which can add thousands of dollars to your borrowing costs. Depending on the lender and where you live, the fees go by different names and can often be confusing -- origination fees, appraisal fees and prepaid interest are among the terms you may encounter. The best advice is to ask your lender for a good faith estimate of these costs (lenders are required by law to give you one) and ask for an explanation of any charge you do not understand.
When you apply for a mortgage, lenders will quote a specific interest rate and a certain number of discount points. However, the market can change while you are looking for your new home, causing rates to go up or down. That’s why it’s a good idea to ask your lender to lock in these rates for a specified period, often 30 to 60 days. If you want to lock in your rate, ask whether there will be a fee, if it is refundable, and get the agreement in writing.
8. Closing costs
Lenders charge several fees when closing mortgage deals which can add thousands of dollars to your borrowing costs. Depending on the lender and where you live, the fees go by different names and can often be confusing -- origination fees, appraisal fees and prepaid interest are among the terms you may encounter. The best advice is to ask your lender for a good faith estimate of these costs (lenders are required by law to give you one) and ask for an explanation of any charge you do not understand.
Ref: lendingtree.com/mortgage-loans/advice/getting-the-best-loan/things-to-know-about-mortgages/
Thursday, April 28, 2011
How to compare mortgage loans
Comparing mortgage loans is one of the most important things you can do when you’re buying a home. The decisions you make will determine the size of your monthly payments, how much you pay upfront, and how much interest you’ll pay over the life of the loan.
You might find it simpler to compare loans if you ask each lender a series of questions, including:
- What is the loan’s interest rate?
- Will I be charged points?
- What are the closing costs and all other fees?
- What is the annual percentage rate, or APR – the rate you’ll pay per year for all the costs associated with the loan?
- Is there a pre-payment penalty?
- How is the loan amortized, meaning how quickly is the principal paid off?
Find out the answers to these questions no matter what type of loan you’re considering. Each can affect the overall cost of your loan.
If you are considering an adjustable-rate mortgage, or ARM, you can compare loans by asking:
If you are considering an adjustable-rate mortgage, or ARM, you can compare loans by asking:
- When does the rate adjust?
- How often does the rate adjust?
- Is there a cap limiting the amount by which the rate can adjust? What would my monthly payments be if my interest rate hit that cap?
- What is the index and margin that will determine my rate? How has the index changed over time?
ARMs are inherently more risky than fixed-rate mortgages because you’re gambling on whether interest rates will go up or go down before your rate adjusts. Understanding the best- and worst-case scenarios can help you weigh the pros and cons as you compare loans.
But there’s one other big question to consider before you get an ARM:
But there’s one other big question to consider before you get an ARM:
- How does the discount introductory rate compare with rates for 30-year fixed-rate loans?
If there’s not much difference when you compare the two, the fixed-rate loan might be a safer bet. You won’t save much in the short-term, and could save a lot over the long term. Plus, you reduce your risk if interest rates shoot up and you can’t refinance before the rate adjustment.
Finally, to truly compare loans, you have to ask yourself some questions:
Finally, to truly compare loans, you have to ask yourself some questions:
- How long do I expect to stay in my home?
- Are my job and income secure over the long term?
- Will I be able to afford higher payments in the future?
- How comfortable am I with risk?
In the end, the best loan is the one that works for your needs.
Ref: lendingtree.com/mortgage-loans/advice/comparing-mortgage-loans/how-to-compare-mortgage-loans/
KK Flight-controller setup guide
The interest in my KK flight controllers was bigger than I had anticipated. I’ve actually sold all of the boards that I had parts for, but as so many of you wanted a controller from me, I’ve ordered some more parts and will have another set of boards ready in another week or so (or two weeks if anything I’ve ordered is delayed).
Some people have actually already got their boards and are now asking for the setup guide. I have the great pleasure to tell you that the wait is now over! So far the guide only covers Tricopter and Quadcopter configurations, but more configs are coming soon.
Update: Quadcopter-X configuration guide is now available as well.
Update 2: Y6 and Hexacopter configuration guides are now up and running.
Some people have actually already got their boards and are now asking for the setup guide. I have the great pleasure to tell you that the wait is now over! So far the guide only covers Tricopter and Quadcopter configurations, but more configs are coming soon.
Update: Quadcopter-X configuration guide is now available as well.
Update 2: Y6 and Hexacopter configuration guides are now up and running.
A big THANK YOU! to all of you that has bought a flight-controller from me. I hope that you’ll be pleased with it and that you will share your projects.
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