December 07, 2001
By: Bev Dodd
Mortgage payment: Make your payment comfortable
Would you like to pay down your mortgage faster by increasing your mortgage payment, if income increased? Today, most lenders will let borrowers permanently hike their regular mortgage payment by up to 10% once each year, on a payment date. That's an effective way to prepay your mortgage, and cut the cost of homeownership. We'll discuss this more below.
Don't build yourself a mortgage payment mountain. It's fine to want the best home you can afford, but be certain that it is comfortable affordability. Although you may find certain mortgage lenders who will stretch your qualification ratios (the ratio of your total mortgage payment to your total income) the traditional ratios--the mortgage payment as 28% of your income and the total of your mortgage payment plus your monthly debt payments as 36% of your income--are good basic guidelines.
When choosing a lender to refinance with, simply looking at interest rates may not always be a fair comparison since some lenders may add points and fees to what appears to be a very low rate, to assess the rate, look at the Annual Percentage Rate (APR), which includes points and lender fees. Additionally, the monthly mortgage payment level on the loans also provides you with a practical level of comparison.
Never shop for a loan based on the lowest payment. If you do, you will most likely wind up with a variable or balloon type loan. These types of loans should not be used unless you are sure you understand how they work and are willing to run the risk of your mortgage payment going up if interest rates rise. Instead, figure out the type of loan you want (fixed or variable), and the term (number of years), and shop for the lowest interest rate with the lowest total fees.
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Bev Dodd is a successful author and publisher of http://www.family-refinance-consolidation-loans.com.
Many have commented that her website offers the best recommendations, links and information on loans, mortgages and financing.