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Questions and Answers on Mortgage Loans

You may want to call or email us with any mortgage questions you may have at (616) 301-1811, Rommie.Bailey@Michigan-Inter-Lake-Mortgage.com

What Is A Mortgage?
A lien that makes property security for the repayment of debt. A Mortgage can finance the acquisition of real estate such as a home. A mortgage has certain benefits compared to other debt instruments such as possibly lower interest rates, less financing restrictions, and long maturity period.

What Is A (LTV) Loan-To-Value? Percentage of the Mortgage Loan Principal to the property's appraised value or sales price. For example, on a $200,000 house, with a mortgage loan principal of $160,000 the ratio is 80% (LTV ratio). Loan with less than 20% equity may require PMI or a Second Mortgage Loan.

What Types of Loans are Available and Advantages?

Most Common Fixed Rate Loan:

• 30 year
• 15 year

Advantages:

• Predictable
• Housing cost remains unaffected by interest rate changes and inflation

Adjustable Rate Loan:

• Payments increase or decrease on a regular schedule with changes in interest rates.

Advantages:

• Start out with a lower rate than a fixed rate loan. This is best when your going to move before your ARM loan may adjust or if you are improving your current financial situation and will refinance within the ARM loan adjustment for a more conforming loan rate.

When Do ARM loans Make Sense?
This is best when your going to move before your ARM loan may adjust or if you are improving your current financial situation and will refinance within the ARM loan adjustment for a more conforming loan rate.

What Are The Advantages Of 20 And 30 Year Fixed Rate Loan?

• 30-Year: In the first 20+ years of the loan, more interest is paid off than principal, meaning larger tax deductions. As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.
• 20-year: Loan is usually made at a lower interest rate. Equity is built faster because early payments pay more principal.

Can I Pay Off My Loan Ahead Of Schedule?
Yes. By sending in extra money each month, or making an extra payment at the end of the year. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal. On a 30 year loan for every dollar applied to the principal will save you 3 dollars in interest.

How Large Of A Down Payment Do I Need?
There are loan programs now available that only require a down payment of 3% or less of the purchase price. Larger the down payment, the less you have to borrow, and the more equity you'll have. More equity in the home the better rate.

What Is Included In A Monthly Mortgage Payment?
The monthly payment mainly pays off principal and interest. But most lenders also include escrows.

What Is An Escrow Account? Do I Need One?
An escrow account is part of your housing expense. It includes: property taxes, homeowner insurance, and dues.

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