Though most of the homeowners end up getting a mortgage, the majority of them don't have an idea about it. Mortgages seem dreadfully dry topic at first glance, and why not? Who wants to discuss fixed and adjustable rates for fun? However, the truth is that mortgages are way more interesting than a blur of numbers and tons of paperwork. This article shares the 5 surprising truths about mortgages to learn. This is also going to help you in your next mortgage deal, especially the first time home buyers who are new in the market can make the most of this information to get profitable deals in the future.
Truth # 1 Mortgage & Death are Related
You will be surprised to know that an old French term “mortgage” means “dead pledge”. This has been named like this because of the way property is bought in mortgage deals. The pledgor (the borrower) buying a property via loan must return the debt to get the rights on the property. Given that the money was at stake, the buying of a home was linked to “mort” meaning death. In older days, buying property was one of the scariest of transactions.
Truth # 2 Mortgage Rates are Volatile
As per one of the surveys, though the average interest rate since 2012 is only slowly increasing, don’t forget that the mortgage rates are still very volatile. It is not wise to be used to the low rates that have been there since 2012, as historically, we have seen the contrary many times. For instance, in 1987, rates rose to a whopping 11.4 percent from 9.1%. The truth is that mortgage is a lot like having a credit card; hence, it must be research wisely.
Truth # 3 Different Mortgages – Highly Different Rates
If you are planning to get a mortgage, keep in mind that little research can help you end up with better rates. You may think that only the present average interest rate is what you are going to get, but it’s not true. The truth is that different lenders offer different rates. Also, if you have a good credit score, chances are you are going to get something way better than the average.
Truth # 4 You Can Sell Your Mortgage!
Yes! your mortgage can be sold. It has become a widespread practice for many borrowers to take out a mortgage from one lender just to have it sold to another entity. The other entity or your original lender might service your loan. i.e. collecting the payments. Selling your loan is not inevitably a bad thing, but it can be an unsettling surprise, particularly if you wanted to continue with your original lender. Don’t worry, the new lender will be under the terms of the loan decided with the original lender.
Truth # 5 Income Is the Most Important Factor
Income bears more importance than assets, to secure a mortgage. The monthly income, in fact, more accurately, your debt-to-income ratio, comparing what you monthly owe or pay to what you earn, makes a significant difference. Though having a handsome amount of money in your bank is not a bad thing, especially if you use it for a down payment, being able to fulfill your monthly financial obligations in a timely way, is the king to get the best mortgage plans in the future.