What Are Mortgage Options Part 3

With so many mortgage options for home mortgage loans, it is not surprising that potential homebuyers are overwhelmed by it all. Here are some mortgages options that may or may not be in your best interest to utilize. Check them out before you commit to any of them.

Mortgage Assumptions is when a homebuyer assumes responsibility for a home seller's existing mortgage. The buyer assumes all the obligations under the mortgage, just as if the loan their loan from the beginning of the purchase of the home. Assuming someone else's mortgage has several benefits for the homebuyer. The first one being the possibility of assuming a mortgage with a lower interest rate than the current interest rate. The second one being the savings of the settlement costs associated with a new mortgage. The buyers who do best on assumptions are those who have the c ash to pay the difference between the sale price and the balance of the old loan, basically the previous owner's equity. If a second mortgage is required to cover the equity, the interest rate could be high enough to surpass the savings of the settlement costs.

Mortgage Closing Date – There is not financial advantage in closing on one day of the month as compared to any other day. The interest begins on your loan on the date of closing. Since they is not point in paying interest until you are ready to move, you may want to select a date closer to the day you will be moving in. Your mortgage loan can close at any time during the month and there is always an interest adjustment at closing based on the exact closing date. This is called the per diem interest. For instance, should you close on July 29 you will pay per diem interest for July 30, 31 and August 1. Your first regular monthly payment will be due on September. However, if you close on July 3 you will have a choice. Pay the closing interest for 29 days with the regular first payment due on September 1, or you can receive interest credit at closing for 3 days, with the first regular monthly payment due on August 1.

A Demand Clause is something to watch out for. It is even better for the lender than a due on sale clause or an acceleration clause. An acceleration clause allows the lender to call the loan if the borrower violates some provision in the contract, such as a requirement that the loan must be repaid upon sale of the property. A due on sale clause requires that the loan be repaid upon the sale of the property. Its purpose is to protect the lender in a rising interest rate market. Lenders are concerned that borrowers with low-rate mortgages who sell their homes will arrange for the buyers to assume the loans. Lenders want these loans repaid so they can make new loans at the higher rate. A demand clause allows the lender to demand repayment of the loan for any reason. It protects the lender against having a low-rate mortgage assumed b y the homebuyers in a rising interest rate market. The demand clause also allows the lender to raise you interest rate to meet the rising rate market even when you aren't selling your house. The lender can force you to accept the higher interest rate by threatening to call the loan if you do not agree to the terms of the new higher interest rate loan.

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