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It depends who you negotiate with. Some lenders are willing to haggle on both the loan rate and the number of points, but this is not typical among more established lenders.
This is why it pays to shop around for the best loan rates. And know the market so that you sound informed when talking to a lender. Read the published rates in local newspapers or check the growing number of Internet sites that publish such information.
Also, always make a point to consider the interest rate along with the points to access which loan is truly the best.
Interest rates are much more open to negotiation on purchases that involve seller financing. While they are usually based on market rates, some flexibility exists when negotiating on the rate.
Long-term, fixed-rate mortgages are preferred by most home buyers because they offer security and stability. The interest rate does not fluctuate over the life of the loan, so the total amount of principal and interest always remains the same. The monthly payment can change, however, if local property taxes, which are normally part of the monthly mortgage payment, increase.
Because the life of a fixed-term loan is usually long-anywhere from 15 to 30 years-you have plenty of time to repay it and there is no call provision written into the mortgage. A call allows the lender to demand the balance of the loan be paid in full before the actual payoff date.
On the negative side, the interest rate on a fixed mortgage is usually two or three full points above the current rate on an adjustable rate loan, at least initially. But for buyers seeking security, the comfort of knowing what their payments will be year after year, and no plans of selling their home in the foreseeable future, this is a small price to pay. If rates drop, they may be able to refinance their home loan and get a lower rate.
The 15-year mortgage offers you a chance to save thousands of dollars over the life of the loan. This is because the interest rate is typically lower and amortization is half that of the 30-year loan, which means that the total interest paid on the 15-year note, as compared to a 30-year note, is significantly less because of the shorter borrowing period.
Put another way, a 15-year loan accrues principal much more quickly than a 30-year loan, so you get to own your house in half the time.
However, because you are building equity faster and paying down the loan sooner, a 15-year mortgage requires higher monthly payments.
Get a lender to help you calculate the overall savings of the 15-year loan versus the 30-year mortgage. In the end, though, base your decision on your circumstances and overall financial plan, such as whether you are nearing retirement age and also will have to shell out college expenses for children, in which case a 15-year loan may not be for you. Remember that your spending habits, budget, and financial goals should all be considered before making a final decision.
The main reason buyers sign on for these type of loans, which add 10 years to the traditional 30-year mortgage, is to take advantage of smaller monthly payments.
According to real estate experts, the shorter-term loan is usually more advantageous for the home buyer. The drawback becomes apparent simply by calculating the cost of additional interest payments, which can total thousands for the privilege of just saving the difference of a few dollars in monthly mortgage payments.
Because the interest rate market fluctuates constantly and is subject to quick movements without notice, locking in a mortgage rate with a lender certainly protects you from the time your lock is confirmed to the day it expires.
Lock-ins make sense in a rapidly-rising rate environment or when borrowers expect rates to climb during the next 30 to 60 days, which is typically the amount of time a lock-in remains in effect.
A lock-in given at the time of application is useful because it may take the lender several weeks to prepare a loan application. These days, however, automated loan practices have cut the time quite a bit.
Lock-ins are not necessarily free. Some lenders require you to pay a lock-in fee to guarantee both the rate and the terms.
If your lock-in expires before you close on the loan, most lenders will base the loan rate on current market interest rates and points.
The interest rate on a purchase money note is negotiable, as are the other terms in a seller-financed transaction. To get an idea about what to charge, sellers can check with a lender or mortgage broker to determine current mortgage rates on loans, including second mortgages. Most interest rates, however, are generally influenced by current Treasury bill and certificate of deposit rates.
Because sellers, unlike conventional lenders, do not charge loan fees or points, seller-financed costs are generally less than those associated with conventional home loans.
Understandably, most sellers are not open to making a loan for a lower return than could be invested at a more profitable rate of return elsewhere. So the interest rates they charge may be higher than those on conventional loans, and the length of the loan shorter, anywhere from five to 15 years.