Mortgages And Interest Rates

Now, the rate of interest you will be able to get on your mortgage will depend on how much down payment you are going to put.

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Like if you are going to put 20% down payment, you don’t have to pay mortgage insurance which generally runs close to 0.5% to 1%. If your credit score is high, your interest payments will come down. If you have some money in the bank as savings, lenders feel more secure and will give you better interest rates. You can borrow money on a 15 to 30 year balloon. Generally, 15-year mortgages have better interest rates but your monthly payments will be more. Lock yourself in for a fixed rate of interest, that way; you will know exactly how much your payment will be. Sometimes, floating rates of interest which are good only for one year can be much lower than the fixed rate for 15 or 30 year balloon. The problem with floating rates is that if the interest rates go up, your interest payments every month can double or triple. I have seen floating interest rates going up to 18% in the late ’80s. Now, how much money at a time you will be able to borrow will depend on your interest rates. In interest rates are lower, you can borrow more.

To give you an example, if you want to borrow $100,000, it will cost you close to $6,500 at 5%, $7.200 at 6%, $8,040 at 7%, and $8,700 at 8%.

Now, if interest rates are 5%, you can spend up to $13,000 a year, and then you can borrow $200,000 on your house.

Buying A House Without Any Down Payment

A lot of people stay in rental properties because they think they do not have any down payment to buy a house, so they cannot buy a house. In olden days, banks did not ask for 20% down payments. But now, banks and financial institutions do not require those kinds of payments. The government wanted people to buy homes so if you are a first time home buyer, you can buy the house by putting down as low as 5% down payment or no payment at all. A lot of builders sometimes unload homes with no down payments at all. They will also cover your closing cost only. The only difference is if you buy a house without any down payments or low deposits then your interest rates will be higher and it will cost you more money to carry the house and you will end up buying a low-value house.

It is advisable to put up to 20% down payment. If you will do that, then you will be able to get really low interest rates.

By Ashok of http://becomerichinfiveyears.blogspot.com



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