Home mortgage loans are offered against collateral security of the property you purchase. However, you possess the house you purchase and have its ownership as well; the lender also has an “ownership interest” on it until the loan has been paid.

The mortgage loan rates have come down, which makes the mortgage loans attractive for borrowers. Mortgage loan rate varies according to loan plans. Fixed interest loans have an interest that is fixed for the entire loan tenure. Here the mortgage loan rate never changes.

Another type of mortgage loans is flexible-interest mortgage loans. The interest rate of flexible interest mortgage loans increase or decrease depending on the market condition and the national economy. Consequently, your mortgage loan’s term may go up or down but the monthly mortgage payment will remain same.

Mortgage Loan Application Process

Mortgage loan application is filled in after deciding the mortgage loan plan. This application for mortgage loans has columns related to your personal details, income details, credit history and the details of the property that you propose to buy. You may be asked to submit documents as proof of information you provided along with your mortgage loan application form.

On receiving the mortgage loan application, a mortgage loan advisor will contact you for verification of the details. After verifying your details and your income source, a surveyor will survey the property and evaluate it. On successful verification, you will be granted the mortgage loan amount to purchase your home.

Things To Remember Before Selecting Mortgage Loans

Your home mortgage loans will be amortized in regular monthly instalments. The most popular term for home mortgage loans is 30 years. The choice of mortgage loan term depends on your repaying capacity. A long-term mortgage loan plan has low monthly repayments. However, you end up paying more interest on your loan.

A short-term mortgage loan such as 10 or 15 years has high monthly payment. However, the total interest that you pay on that mortgage loan is lesser. Before you apply for a home mortgage loan, calculate your current and future income and then decide the period for which you need the mortgage loans.

We suggest you to choose a term for mortgage loans that has comfortable payment plan to let you own the house and still have sufficient funds to enjoy your life.

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No one likes to be saddled with a long-term debt such as a 30-year mortgage. Because of this many ways have been thought up where people can pay off their mortgages well ahead of schedule.

These methods sometimes promise you’ll be paid off in 7 years, some 10 years, 15 years and some incredibly promise you will pay off your mortgage 26 years ahead of schedule. I’m sorry, but now I must hit you with sobering thought number 2: there are only two ways to pay off your mortgage early!

By the end of this article you will find out what these two ways are, but first let’s talk about some of the not so real ways.

Accelerator mortgage

With an accelerator mortgage, you pay every cent you make into a mortgage account and at the end of the month your mortgage payment is taken out of the account. Proponents of the accelerator mortgage say it works because this account you pay into pays interest and that compounding interest negates the interest you are paying on the mortgage.

However, when the agent sets up your accelerator account, he/she asks you how much you want to leave in your savings each month to be paid toward the mortgage. You will even be egged on. They will ask, “$250, $500, $1,000?” $1,000! Heck, if you paid that much toward your mortgage each month, you would pay off any mortgage way ahead of schedule!

If you were to say, “well, nothing. I don’t have anything left after groceries and other expenses.” They won’t want to give you the mortgage because the compounding interest in this mortgage account means very, very little. The heart of the accelerator plan is you pay extra principal in the way of savings left in your account each month.

Biweekly, Bimonthly and Weekly Plans

With the biweekly plan you are led to believe making two payments a month, which together equal the same amount you have been, paying monthly, will take 7 years off the time it takes to pay off the mortgage.

In reality, with a biweekly plan you make 26 half payments or 13 monthly payments each year instead of 12 so, of course, you will pay off your mortgage a lot sooner. The backbone of this plan is you are led to believe you will not be paying more money each month, but the fact there is more than 4 weeks in a month is the real reason it works. Oh, and by the way, for getting fooled like this you get the pleasure of paying about $1,000 upfront in fees to convert to the biweekly plan!

There is no such thing as a bimonthly plan. It is just a Biweekly plan improperly titled. Weekly plans are the same as biweekly plans cut up into smaller payments, but the same arithmetic applies.

The only two ways

The conclusion is there are only two ways to pay off a mortgage ahead of time. One is to pay more principal each month. For instance, the payment on a 30-year mortgage for $200,000 at 6.25% is $1,231. However, if you pay an extra $270 each month, you will pay off the mortgage in full, 11 years ahead of schedule and you will save over $100,000!

The only other option you may be able to get that will help you pay your mortgage earlier is to get a lower interest rate and continue to make the same monthly payment. In the example above, if you were able to refinance at 5.50% but you continued to pay $1,231 monthly, you would have that mortgage paid in full in 25 years, instead of 30 years.

Still, paying $1,231 monthly is the same as making additional payments toward principal because the scheduled monthly payment for $200,000 at 5.50% is $1,135. So, here is the final conclusion; you can try to fool math, but it is just as futile as trying to fool Mother Nature. You can’t do it! To get your mortgage paid ahead of time, you have to make principal payments ahead of time one way or another. That is all there is to it!

Ed Lathrop is a successful real estate investor. He has developed EzCalculator, a mortgage calculator that shows you how to save $100,000 on your mortgage. Come visit this free site at free financial calculator . Also, find out how to get and use your amortization table to make big money at amortization schedules free. These sites are not owned by any lender, so no one will harass you for visiting!

Balloon mortgages are quite popular amongst many home buyers. It has a shorter time period, having a term of five to seven years, but with the payment is based on a term of 30 years. The interest rate in a balloon mortgage is lower than the usual mortgage, and it has been found that, it is easier to avail compared to the traditional 30 year fixed mortgage. However, there is a disadvantage in this type of mortgage, where you would need to fully pay off the balance outstanding at the end of the mortgage term. This condition may put you in a situation where you would need to go for re-financing against the real estate property that you have purchased, sell your home, or convert the existing balloon mortgage into the traditional one at the prevailing rate of interest. Balloon mortgage may not suit all. It is ideal for those people who have need for loans for a short period of time. There are several loan schemes that are available, which would need a balloon payment at a specified period of time.

If you avail balloon mortgage, you will need to pay a fixed amount for a defined period of time, may be three to seven years. After that period is over, you would need to pay the full outstanding in one go. The payments that you make against this type of mortgage are less than necessary for amortizing, and this puts you in the advantage in making lower than normal payments. This type of mortgage becomes attractive to people, because of its lower payment, and this lower payment is availed by people who could be looking for a larger house, for which they do not have enough money.

The balloon mortgage is available for a definite term, after which you are required to pay back the balance in a lump sum. The condition is that, the outstanding has to be paid off fully after the term is over. Since there is no other way, you have three options with you. You may like to go in for re-financing and a conversion of the balloon mortgage into the traditional mortgage that we know. This option is taken by most of the people. The second option is to sell your house before the balloon mortgage term gets over. In taking up the third option, you would be paying larger sum as installments each month, being more than what has been stipulated in the terms of payment. In this way you would be paying off the complete mortgage dues at the end of the period, or you will have an affordable outstanding when the balloon mortgage term gets over.

J Amalorpava Mary is the owner of MortgageCentreDirect.Com, to find out more on Mortgage Loan, Mortgage Rate and much more mortgage information visit her site.

Fixed rates. Fixed rates are the old standby. They are what you’ll find when you’re investigating traditional mortgages. When your loan has a fixed rate, your interest doesn’t change throughout the entire life of your loan. Most fixed rate mortgages last for 10, 15, 20 or 30 years. This is a great option when interest rates are low. If you can lock in an interest rate of 4%-8% for the life of a 30 year loan, you’re doing pretty well. However if interest rates are high, you may want to look for the next type of interest rate option.

Adjustable Rate Mortgage. Otherwise known as an ARM, an adjustable rate mortgage is just that – adjustable. Usually, lenders guarantee a rate for a specific period of time, generally three, five, or seven years. However, once that time period has expired, the interest rate on the loan will change to the current going rate. Generally, there is a cap on how high the interest rate can go. This is called a ceiling, and your ceiling will be documented in your lending agreement.

For example, if the current fixed interest rate is 10% and you decide you’d rather go with an ARM, which is generally lower than the current fixed rate, then maybe you could get an ARM at 7% guaranteed for five years. Once your five years have expired, the current interest rate could be lower than your current interest rate or it could be higher. If it is up to 14% that’s a huge jump and your mortgage will go up quite a bit; however, if you have a 3 point ceiling agreement in your mortgage your interest rate will only go up to 10%. With an ARM, your interest rate is subject to change every year after the initial reduced rate period has expired.

Two Step mortgage. A two step mortgage works very similarly to an ARM. You will lock in an interest rate, usually a bit lower than the going interest rate, for a designated period of time. Once that time has expired, your second step is for your interest rate to jump to the going rate. It’s a bit of a gamble because you don’t know what the future holds. However, it does enable you to get into your home at a lower interest rate.

Balloon. With a balloon mortgage your interest rate and monthly payment remain the same for a certain number of years. At the end of that time period, your loan is due in full. If you choose this option you will have to refinance, pay off your home, or sell your home. Balloons generally run for five or seven years.

There you have it. Just about any mortgage you come across will fall into one of these discussed categories. Happy borrowing!

Eddie Lamb owns LiveMortgageFree.com a website devoted to helping homeowners, first time buyers or tenants. You’ll get your own exclusive access to the program and bonuses that will get you on the road to living Mortgage Free and will change the way you view money forever. For more information visit: LiveMortgageFree

Unfortunately, there is a lot more involved in a monthly house payment than principle and interest. It is these extras that can make the difference between making mortgage payments with ease, and foreclosure.

In this article you will find out how to calculate a mortgage payment the right way, in its entirety. By doing this, you will borrow an amount of money you will be able to pay back without stress. This will make it easier to budget your money without fear of getting behind on your payments.

Principal and Interest are the Starting Point

$100,000 financed for 30 years at 7% requires a mortgage payment of $665.30. Knowing this in today’s market gives you a heads up when you need to quickly estimate a mortgage payment. Of course, the mortgage payment you will be estimating will be the interest and principle only. This is the starting ground from which your monthly house payment will be calculated.

For simplicity’s sake, we will say you are thinking of buying a home where you will need a mortgage of $200,000 and the going interest rate is 7% and, like almost everyone else, you will be financing for 30 years. This means your principle and interest payment will be 2 times $665.30 or, $1,330.60 a month. Now, what else will be added to this amount each month?

Taxes and Insurance

Most lenders make sure you have homeowner’s insurance. They will also see to it you pay your property taxes. They do this, not so much because they are nice guys, but because they don’t want somebody else to take your property away from them. How could this happen?

If someone got hurt on your property and successfully sewed you, they could take everything you had, including your house. This would give your lender a legal burden they wouldn’t want or need. To prevent this from happening, the lender usually collects money from you each month to pay for your homeowner’s policy. This way you and they will be protected against this kind of suit.

Another entity that could fight your lender for ownership of your house is the local government and this is exactly what they will do if you default on your property taxes. For this reason, the lender will collect money from you every month to be used to pay your property taxes.

You can figure your yearly property tax will cost you at least, 1 to 2% of the worth of your home. So, on a $240,000 property, you can guess you will be paying $2,400 to $4,800 a year. This calculates to $200 to $400 a month.

This amount will depend upon where you live. You should be familiar with a town’s mill rate before you buy a home there. Your homeowner’s policy will cost about $700 to $1,000 a year, so you can figure around $75 a month for this expense.

Water and Sewer

Another pair of monthly housing expenses are water and sewer. If you live in the city, this is a classic case where they get you coming and going. City water will easily cost you $50 a month and the sewer, which is just another word for tax, will cost you, in some cities, about $1,000 a year, which figures out to $85 a month.

If you live out of the city, your water and sewer charges become the cost of the upkeep of your well and septic system. However, after all is said and done, one problem with either one of these things will cost you an amount that will be close to what the cost is for city water and sewer.

These costs will come at much larger intervals than a monthly expense but they will be much greater amounts. In other words, it all evens up in the long run. Or should I say it all comes out in the wash?

Your Payment is Bigger Than the Calculator Told You

The end of the story is, to pay this $200,000 mortgage; you will need to pay $1,330 a month for interest and principal. Plus, you will be paying, let’s say, $300 a month property taxes and $85 a month for homeowner’s insurance. So far, this amounts to $1,710 monthly. Then add $50 for water and $85 for sewer and you will come up with $1,850 a month for your real mortgage payment.

Of course, there are more expenses required to live, but taxes and insurance, along with water and sewer are things that people who rent don’t ordinarily pay. It is knowing about these expenses in advance that is the key to realizing you could be overextending yourself financially thus, risking foreclosure. So, be sure to calculate your complete monthly mortgage payment before you say, “I’ll take it!”

Ed Lathrop is a successful Real Estate investor. He has developed EzCalculator, a Mortgage Calculator that shows you how to save $100,000 on your mortgage. Come visit this free site at Free Financial Calculator. Also, find out how to get your amortization schedule and use it to save big money at: Amortization Schedules Free. These sites are not owned by any lender, so no one will harass you for visiting!