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We recommend that you consult with a qualified investment professional.
Refinance Loan
A Refinance loan enables you to pay off your existing first mortgage along
with a second mortgage if applicable. There are many reasons to choose this
type of loan, including taking advantage of lower interest rates, obtaining
lower monthly payments, or “cashing out” to obtain funds.
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Home Equity Loan or Line
Sometimes called a second mortgage, a Home Equity Loan uses your home’s
equity as collateral. You receive the loan proceeds in a lump sum and make
regular payments over the life of the loan. Interest that you pay on this loan
may be tax deductible.
An Equity Line differs from an Equity Loan in that you have access to a line
of credit which you can draw from as you choose. Interest that you pay on this
loan may also be tax deductible.
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Debt Consolidation Loan
A Debt Consolidation Loan is primarily structured for individuals who have
various amounts of existing debt. This type of loan allows you to consolidate
your personal loans, credit card balances, student loans, and any other debts
you have into one single loan, often at a greatly reduced interest rate. Because
Debt Consolidation Loans are considered second mortgages, your interest payments
may be tax deductible.
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Appraisal Value
In order to determine the fair market value of your home, a lender will order
an independent appraisal. This value will play a large part in determining
how much money you will be able to borrow.
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Down payment
These are personal funds you will use toward the purchase of your new home.
When added, the amount of your down payment and the amount of your loan will
equal the purchase price of your new home.
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Equity
The difference between the value of your home and any debts you have against
your home is considered equity. Your equity will increase as the value of
your home increases and the amount of debts you have against your home decrease.
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Fixed rate mortgage
The interest rate on a Fixed Rate Mortgage stays the same for the life of your
loan. The payment amount also remains the same.
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Homeowner’s insurance
This is insurance that lenders will require you have on your property. It can
protect against damage caused by such things as fire, floods, earthquakes,
hurricanes, tornados, and other catastrophic events. Most policies also provide
liability insurance in case someone is injured on your property.
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Interest rate
This is the rate quoted for your loan.
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Loan-to-value (LTV) ratio
Your loan amount divided by the appraised value of the property in question
equals the Loan-to-Value ratio.
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Mortgage/Discount points
This refers to a charge based on a percentage of your loan amount. One mortgage
point is equal to 1% of your loan amount. Points are often ‘paid’ to
reduce the interest rate on a loan.
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Origination fees
This is the fee charged for originating and processing a loan. The amount can
add up to as much as 1% of the total loan amount.
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Other loan payments
This refers to other installment type loans you may have such as student loans,
car loans, or personal loans.
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Private mortgage insurance (PMI)
Private Mortgage Insurance protects your lender in the event you default on
your loan. PMI is usually only required if the Loan-to-Value ratio is more
than 80%.
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Property tax rate
This is the rate used to calculate property taxes.
Property taxes
Property taxes are paid to your city, county, or taxing municipality. Your
property taxes can be deducted on your taxes. The amount you pay is usually
a pre-determined rate charged against the assessed value of your home. For
example, a 1% property tax assessed on a $200,000 home would be $2,000.
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Savings rate
This is the return you expect to receive on your investments.
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Tax rate
There are 5 Federal tax rates, ranging from 15% - 39.6%. To identify your tax “bracket”,
refer to the I.R.S.’s tax rate schedules.
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Term
This is the period of a loan, defined in years. Most of the mortgages you see
will be for either 15 or 30 years.
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Upfront costs
These are the initial expenses associated with acquiring a loan or a line of
credit.
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