If you're in the market to refinance your home mortgage loan, learning the lingo can boost your belief and prevent loan officers from taking advantage of you. learning mortgage terminology is a lot like eating your spinach; however, here are basic terms you need to learn before shopping for a new home loan.
Adjustable Rate Mortgages
Mortgage loans with interest rates that change periodically are called Adjustable Rate Mortgages and are often abbreviated Apr. The interest rate is tied to a definite financial index like the prime rate or treasury index. These loans typically come with an ultra low preliminary or "teaser" interest rate; however, at the end of the preliminary duration the interest rate is reset to the compact mortgage rate.
Annual division Rate (Apr)
The Apr is a numeric representation of all costs related with a mortgage offer expressed as a annual interest rate. Mortgage lenders all have different ways of calculating the annual division Rate and it ordinarily does not accurately relate third party charges. You're much best off requesting a Good Faith evaluation when comparison shopping instead of relying on the Apr.
Fixed Rate Mortgage Loan
Home loans that have an interest rate set at conclusion that does not change for the duration of the mortgage's term distance are fixed rate mortgages.
Good Faith evaluation (Gfe)
Mortgage lenders are required by law to provide you with a copy of this document within three days of receiving your application; however, most mortgage companies will provide you one on request. The Gfe outlines all estimated costs related with your loan and is a useful tool for comparing loan offers.
Loan to Value Ratio (Ltv)
Your Loan to Value Ratio is the derived from the appraised value of your home and how much you're borrowing. This ratio is typically expressed as a division and most lenders do not like Ltv ratios higher than 80%. High Ltv ratios can lead to hidden Mortgage Insurance, which is something you want to avoid paying at all cost.
Points (Discount & Origination)
Points come in two flavors. There are allowance points you pay in transfer for something like a lower interest rate or more suitable terms and origination points you pay for your loan representative's services. One point is the equivalent of one percent of your mortgage amount. Unless you plan on holding your mortgage for a very long time it is ordinarily not worthwhile paying points if you can avoid them.
Term Length
The term you choose is the number of time you have to repay the loan. The most base choices for term distance are 15 or 30 years. The longer term distance you choose the lower your payment will be; however, you will pay much more to the lender for your financing.
Third Party community Charges
These are fees that you will be required to pay at conclusion that appear on your Good Faith Estimate. Mortgage companies often low-ball these costs to make their loan offer appear more attractive. always collate line-by-line using the Good Faith evaluation when comparison shopping for a new mortgage.
You can learn more about refinancing your mortgage without being taken advantage of with a free mortgage tutorial.
Refinance Mortgage Basics - Terminology You Need to Know