Real Estate Investing Facts

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Discussions of mortgages quite often focuses on interest rates (especially when looking at a refinance), but there is a much more basic decision to make. Should you go with a 30 year mortgage term or a 15 year mortgage term?

30 Year vs. 15 Year Mortgages

There are two points that always come up with any discussion of mortgages. The first point is how can you qualify for the most money with the lowest payment. And the second point is how can you get the lowest interest rate for the mortgage. While these are important issues, there is an additional one that people fail to consider, resulting in wasted money.

The term of a mortgage is extremely critical for a couple of reason. First, it sets the length of the obligation you are undertaking. Second, it defines the amount of interest you are going to pay over the life of the loan. These are huge issues when it comes to building equity.

When looking at the term of the loan keep in mind that the longer the loan term the more interest you are going to pay. The other side is that with a longer term you will have a smaller monthly payment. While this may sound like a good idea at first to have a smaller payment, it can backfire on you in the long run by paying thousands more in interest.

Most people focus on interest rates as a way to save money on mortgages during a refinance. This is a valid approach, but playing with the length of the loan is a better way to save money. If you can cut the payments in half by going with a shorter loan, you can save huge amounts on the total interest repaid to a lender.

Making decisions on the term of the loan is quite simple and different for everyone depending upon your financial situation. There is no one correct choice when making this decision. You will need to determine where you are comfortable in your monthly mortgage payments and shorten the term according to that decision. The shorter the term, the less the interest you are going to pay. You will also build equity in your home so much quicker.

The modern mortgage industry has a variety of different term length products. When applying for a refinance, take the time to evaluate the different terms to see if you can find a loan that is perfect for your situation. To find out more information about which loan you would qualify for check out http://www.geniusrates.com where you will find up to date current mortgage rate information and connect you with several different lenders who will be able to assist you with obtaining the right loan for you.

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To refinance is to pay off your existing mortgage with another one at a lower rate.

A cash out mortgage refinance is the most common type of refinance. It is when you refinance your existing mortgage and borrow some of your equity in a lump sum to use it for other purposes such as home improvements, college, medical reason, and etc.

Other reasons people use a cash out refinance is to use the equity in their home to invest in real estate, or start their own business.

Cash out refinances are very good tools when used for the right reasons. It is not wise to do cash out refinancing if you are going to receive a higher interest rate than what you already have on your current mortgage.

Looking at your rate on your first mortgage and seeing if it is a good rate to the current rate is a good way of determining whether or not you should be refinancing it.

However, if you are looking to tap into the equity you have acquired in your home without touching your current mortgage, you may want to consider a Home Equity Loan.

Home equity loans allow you to borrow the equity you have acquired without touching your first mortgage. A home equity is a second mortgage and usually at a higher interest rate.

For illustration, if you have acquired $50,000.00 worth of equity in your home, you can borrow what you need of that equity, without your first mortgage being affected.

The cash out refinance and the home equity loan are very similar and serve almost the same purpose, your situation should determine the right choice for you.

As always, I want to leave you with this reminder. Do your homework, educate yourself, and shop around for the best deal. One of the best place of looking is online for rates and selective information about your refinance. You can see what nationwide mortgage rates are doing at http://www.geniusrates.com. They have a tool bar on the right hand side that is constantly displaying rates as they change on the market all day long. It also shows which way the rates are headed to know whether or not to lock in your rate.

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