Many people consider mortgages a bit complicated since different types of mortgages will all have different requirements to determine if you are eligible for funding. When it comes time to apply for a mortgage, these options and conditions can make things complicated and you probably have many questions without anywhere to find the answers. This is why we are happy to give you the most accurate information available about some of the most frequently asked questions about mortgages.
A fixed-rate mortgage loan will have the same interest rate for the duration of the term or borrowing period. Variable-rate mortgages will have an interest rate that can be subject to changes and fluctuations over time. Variable rates are given at either a premium or discount to the prime rate. And should the prime rate change during the borrowing period, the interest rate will be adjusted accordingly.
An insured mortgage will be offered when you purchase a home having less than 20% down payment. This is when your down payment is less than 20% of the purchasing price, you will be required to also buy mortgage default insurance. Mortgage default insurance is coverage that will protect the lender if you do not make your payments. This fee that you pay for mortgage loan insurance is called a premium. The premium can range from 0.6% to 4.50% of your mortgage amount, depending on the size of your down payment. The bigger your down payment is, the less you will pay in mortgage default insurance premiums. The premium will be included into the total mortgage amount.
An uninsured loan, usually known as a conventional loan, is a mortgage loan that will not carry any lender insurance premiums. This loan is for no more than 80% of the appraised value or purchase price of a property.
There are many different sources of finance that you could use for your down payment. These will include:
A bridge loan is a temporary finance option designed to help you as a borrower bridge a gap between the date at which your existing property is sold and the date your new property is purchased. This allows you to use the equity in your current home to help pay the down payment on your next property while you wait for your current property to sell.
Both co-signers and guarantors can help otherwise ineligible borrowers qualify for a mortgage. The co-signer will own the home with the individual living on the property and making the mortgage payments.