What is an adjustable rate mortgage?
An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. Normally, the initial interest rate is fixed for a period of time, after which it resets periodically, usually in relation to an index, and payments may go up or down accordingly.
Can I pay points in exchange for a lower interest rate?
Yes, points, also known as discount points, lower your interest rate in exchange for paying an upfront fee as an alternative to paying more interest over the life of the loan. On average, one point can lower your interest rate
by a quarter percent. Each point is equal to one percent of the loan amount.
To determine whether it makes sense for you to pay points, you should compare the cost of the points to the monthly payments savings created by the lower interest rate. Divide the total cost of the points by the savings
in each monthly payment. This calculation provides the number of payments you’ll make before you actually begin to save money by paying points. If the number of months it takes to recoup the points is longer than
you plan on having the mortgage, you should consider other loan program options that may be better suited to your needs.
If you’d prefer not to make this calculation the “old fashioned way”. We have a points calculator.
Is comparing APRs the best way to decide which lender has the lowest rates and fees?
You can use the APR as a guideline when shopping for loans, but you should not depend solely on the APR when choosing the loan program that's best for you.
The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring some closing fees be
included in the APR calculation. These fees, in addition to the interest rate, determine the estimated cost of financing over the full term of the loan. Since most people do not keep their mortgage for the entire loan term,
it may be misleading to spread the effect of some of these up front costs over the entire loan term.
In addition, the APR doesn't necessarily include all the closing fees and lenders are allowed to interpret which fees they include. Fees for things like appraisals, title work, and document preparation are not included,
even though you'll probably have to pay them.
For adjustable rate mortgages, the APR can be even more confusing. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments. Don't forget that the
APR is an effective interest rate not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and your loan term.
You should look at total fees and possible rate adjustments in the future if you're comparing adjustable rate mortgages. Plus, you should consider the length of time that you plan on having the mortgage.
How do I know if it's best to lock in my interest rate or to let it float?
Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down.
If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock in period.
It won't do any good to lock your rate if you can't close during the rate lock period. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period.
If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time since you will need to contact that
lender for a subordinate request.
If you think rates might drop while your loan is being processed, take a risk and let your rate “float” instead of locking. You can lock in your interest rate at any time by contacting you Mortgage Loan Officer.
What is your Rate Lock Policy?
General Statement: The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.
Lock-In Agreement: A lock is an agreement by the borrower and the lender and specifies the number of days for which a loan’s interest rate and discount points are guaranteed. Should interest rates rise
during that period, the lender is obligated to honor the committed rate. Should interest rates fall during that period, the borrower must honor the lock.
Timing: You may lock your rate at any time during the processing of your application by contacting your Mortgage Loan Officers.
Fees: We do not charge a fee for locking in your interest rate.
Lock Period: We currently offer a 60 day lock-in period. This means you must close within this number of days from the day your lock is confirmed by us. You should discuss your options with
your loan officer.
Are there any prepayment penalties charged for these loan programs?
None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.
What is the difference between Homeowners Insurance and Title Insurance?
Homeowners insurance and title insurance are two very different types of insurance coverage that protect against different risks.
Homeowners insurance covers loss or damage to your home; other structures on your property; personal property kept in your home; loss of use; liability; and medical expenses for accidents that
occur on your property.
Title insurance, on the other hand, protects your ownership in the real property. Title insurance guarantees that you have true entitlement to the property. Many lenders will require you to carry title
insurance so they know for sure that you have clear ownership of the property and the home.
A title insurance company will conduct research before a loan is approved and they search for any outstanding liens, encumbrances or other defects that may hinder the property ownership from becoming solely yours.
Once the Title Insurance Company is sure that that property does not hold any such liens, the Title Insurance Company will issue title insurance. This protects the owner from anyone else trying to claim ownership of
the property.
Apply now for a better mortgage experience with Suffolk Credit Union!