Connecticut Mortgage Tips
Mortgage Tip: Make Bi-Monthly Payments
By simply changing your payment frequency from once a month to half a
payment every two weeks through an automatic process!
By converting a monthly mortgage payment of $1,000 to $500 on a Bi-Weekly
basis, you'll make 26 one half payments over a year's time. That's the
equivalent of 13 monthly payments.
Here's an example:
$100,000 Loan at 8.5%
30 Year Loan Mortgage Savings Program
Current Payment $1000 PITI $500.00 Bi-Weekly
Paid Off In 30 Years 22.6 Years
Total Interest Paid$ 176,809$ 125,075
YOU SAVE $ 51,734
The Result!
You'll save an amazing $51,734 and own your home many years sooner!
This is a guaranteed simple way to save tons of interest.
Mortgage Tip: Consider a 15 year mortgage rather than a 30 year mortgage
Although your monthly payment may be higher, you can save tens of thousands
of dollars in interest charges by shopping for the shortest-term mortgage
you can afford. On a $100,000 fixed-rate loan at 7% annual percentage rate
(APR), for example, you will pay over $75,000 less in interest on a 15-year
mortgage than on a 30-year mortgage.
You can save thousands of dollars in interest charges by shopping for the
lowest-rate mortgage with the fewest points. On a 15-year $100,000
fixed-rate mortgage, just lowering the APR from 7% to 6.5% can save you more
than $5,000 in interest charges, and paying two points instead of three
would save you an additional $1,000.
If your local newspaper does not periodically run mortgage rate surveys,
call at least six lenders for information about their rates (APR's), points,
and fees.
Mortgage Tip: Mortgage Refinancing
Consider refinancing your mortgage if you can get a rate that is at least
one percentage point lower than your existing mortgage rate and plan to keep
the new mortgage for several years or more. Ask an accountant to calculate
precisely how much your new mortgage (including points, fees and closing
costs) will cost and whether, in the long run, it will cost less than your
current mortgage
Mortgage Tip: Consider an ARM If you do not plan on being in the
home for more than 5 years
When you start shopping, take a look at how long you expect to be in the
house, or have that particular mortgage. Maybe you expect to move-up after
you've built some equity in the house. Maybe you plan to refinance in couple
of years to pull out some equity to help pay for college tuition, or a new
car.
Think beyond the 30-year, fixed-rate loan. "It's the most expensive option,"
said Chris Doolittle, a loan officer in Santa Rosa, Calif. Most people buy a
fixed-rate for 30 years of stability, and never use more than a few years of
it. "Why pay for a part of the yield curve that you're not using?" said
Robert Van Order, chief economist for Freddie Mac.
Consider an ARM
An adjustable-rate mortgage (ARM) starts with a considerably lower interest
rate, but then adjusts every year. This type of loan moves a little bit of
the risk away from the lender, and the lender rewards you with a lower rate.
To protect you from a catastrophic increase in rates (such as when we
experienced double-digit inflation during the late 1970s), ARMs are capped
to rise not more than two percent in any year, and not more than five or six
percent for the life of the loan.
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