mortgagestork.com

In order to get the best deal on your home mortgage loan, it is a good idea to understand certain terms that are specific to the real estate and financial industry. The following are the common terms you’re going to hear when applying for your first mortgage.

Length of the Loan / mortgage term
Loan term is a period of time you have to pay back the money you borrowed from the mortgage lender. A mortgage term can range anywhere from six months loan to 30 years.

Points
A point refers to interest costs paid to the mortgage lender in order to reduce the interest rate. Points are paid one time and are generally equal to 1% of the loan principal. For example, if you were taking out a 100,000 mortgage and wanted lower interest rates, you might have to pay anywhere from 1-3 points (1,000 – 3,000 dollars) to get the rate. It is important to note that some mortgage lenders will advertise very low interest rates, and only if you read the print carefully, you will find out that you have to pay points in order to get the rates.
It’s not always a good idea to pay one-time points in order to get a lower interest rate. In some cases points are not even needed in a deal and are just a bonus for the lender. Always do the math for each mortgage option to find out what will cost you the least amount of money.

Interest Rate
Interest rate is a yearly rate that is charged on the principal of the loan amount provided by the lender. It is a percentage of the principal loan amount. Interest rates can be very different depending on the type and terms of a mortgage. The interest rate has a base percentage dictated by a national index and then percentages are added to this according to the amount of risk the lender is taking by giving you the money to finance the house. With mortgage loan, all of the interest is front loaded, meaning that for the first few years, every payment that you will make go mostly toward the interest.

Loan to value ratio
Loan to value ratio is a ratio that used by your mortgage lender to determine how much they can loan you. The ratio is found by dividing the loan amount by the market value of the home in consideration.

Most mortgage lenders will loan up to 80 percent of the market value of a home. However, there are lenders who will loan more than 80 percent of the market value in exchange for a higher interest rate.

Debt Service Coverage
Debt service coverage is a ratio used by the lender to see if you are capable to pay back the mortgage loan in addition to your other current debt. The ratio is determined by dividing your net income by debt. Most lenders look for debt service coverage ratios of 1.2.

These terms are specific to mortgage characteristic. Do some research or read some more to become familiar with the lending terms you need to know. There are also many mortgage companies online that can help you find direct mortgage lenders.

About the author:
Liza has written various articles about insurance issues, including homeowners insurance, renters insurance and home mortgage.

Article Source: http://www.Free-Articles-Zone.com

Source: http://www.ArticleStreet.com

While there are numerous advantages in owning your own home, the obvious advantage is having some place to call “your own.”

Maybe you would like to settle down in your community and want to have the feeling of permanence and involvement that comes from owning your own home.

Maybe you need more space for you and your family or maybe you would like the luxury of being able to fix-up your home as you see fit and do not want to be restricted in a rental space.

While the above are certainly advantages to owning a home, the additional benefits are just as, or even more so, beneficial.

As an investment, the home will provide security for your future. Houses typically increase in value over time.

It is not unusual for a house that sold fifteen (15) years ago to be valued at much more than its original selling price today. In fact, most property rarely depreciates below its purchase price over an extended period of time.

While fluctuations may occur in the market place on a daily basis, most homeowners find that their property is worth more now than when they purchased it. Just look at the past two years.

Not only does a home usually increase in value over time, each month, as the mortgage payment is paid “equity” in your home increases by the portion of your mortgage payment which is applied to the loan principal. As this amount grows, it becomes a savings plan for your future. Think forced savings account here.

You may be able to someday “cash out” either by selling, obtaining a home equity line of credit or a second mortgage. The money received may be used for planned expenses such as college tuition, home improvements, vacations, retirement or even unforeseen costs for medical emergencies and the like.

Homeowners are also eligible for significant tax advantages that are not available to renters.

Tax advantages are often cited as the most important aspect of home ownership. Most importantly, the interest paid on your home mortgage is usually tax deductible and, therefore, can save you a substantial amount each year in federal income taxes. This can mean savings of thousands of tax dollars annually.

Example: A married couple in the 35% tax bracket purchased a new home on January 1 of the tax year and take out a 30-year, $200,000 mortgage with a 7% interest rate.

Their tax picture would be as follows:

Mortgage payments (principal & interest)
$ 1,330.60 X 12 = $ 15,967.20
Mortgage interest for year = $ 12,780
Tax Rate X 35%
Tax Savings $ 4,473

Consequently, their federal tax burden has been lowered significantly. The tax savings, in effect, is equal to a monthly savings of approximately $375!

Additionally, the points which were paid in acquiring the mortgage loan could also be claimed as a deduction, as are the real estate taxes paid on their home.

Therefore, in your first year of home ownership, a very substantial tax benefit may be achieved.

In addition, if you live in Florida, under Florida law, your principal residence may qualify as “homestead.” This homestead protects your home from the claims of creditors other than a creditor who has a security interest in your home, such as the financial institution holding the mortgage on your home.

Your state may offer a similar protection. Check with your advisors to determine if such protection is available where you live.

There are many financial and non-financial benefits to owning a home; however, prior to purchasing your new home, you should contact your tax or financial advisor to determine the impact the purchase will have on your personal situation, and your potential savings.

In addition to the above tax advantages, when you add a home-based business to the equation, there are even more tax advantages. Of course, you do not need to own your home to take advantage of these tax savings, but you do have to follow specific guidelines to qualify for the deductions. Internal Revenue Service Publication 535 is an excellent resource outlining the specific deductions that you may qualify for and how to make sure that you are following the specific rules for said deductions. For example,the computer you use for your home based business must be in a room not used by anyone in the family that is not invovled in your business. For instance, the computer cannot be in a family room where others are watching t.v. while you are working – that would not qualify.