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Mortgage Payments
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By Thomas Morva

Mortgages for shorter periods normally carry lower interest rates. But in such cases the monthly repayment amount would be higher. Therefore, while trying to decide between a fifteen-year mortgage and thirty-year mortgage, the repayment capacity and savings in Federal and state taxes must be carefully assessed.

Mortgage payments are usually made monthly or bi-weekly, which means twelve or twenty-six installments per year. There are different types of repayment options. One is the fully amortized system. In this, the borrower pays the full installment of the principal loan plus interest and other charges. Then there is the interest-only repayment facility. This results in reduced monthly payments. There is also a minimum option which is less taxing on the borrower’s monthly cash flow. With an adjustable rate mortgage (ARM) the borrower can select each month any one of these, depending on his funds availability.

The borrower can take advantage of the free calculators displayed on several websites to compute the amount of monthly installments. Repayment consists of a number of items. Apart from the principal amount and interest, other details like period of the mortgage, the type of mortgage, property taxes, home insurance, and Private Mortgage Insurance (PMI) fee also have to be taken into account to arrive at the exact amount of the installments.

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While it is possible for the borrower to pay directly for the home insurance, many financiers take on this chore to ensure that payment is made on time. PMI is insisted upon if the down payment is less than twenty per cent of the value of the collateral. Some lenders permit the borrower to discontinue this after a couple of years, or when the mortgage is brought down by twenty per cent.

Paying off a mortgage ahead of schedule may attract a penalty.

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This entry was posted on Saturday, July 29th, 2006 at 5:07 am and is filed under Refinance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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