MORTGAGE LENDING RATES IN VARIOUS PACKAGES

2007-03-08 10:33:40

( Financial )



Banks use money of its depositors as funds to offer loans to its borrowers. Mortgage lending rates are higher than what banks pay for interest rates on deposits. It is how banks profit from loans.

Aside from interest rates, mortgage lending rates also include application fees, title processing fees and other charges related to mortgage processing. The cost of a mortgage processor is also included in computation of mortgage lending rates. Lenders offer various mortgage packages that offer a wide selection of mortgage lending rates applicable to financial capacity of each mortgage applicant.

Some bank mortgage packages are perceived to be cheaper since no cash outlay is required from mortgage applicants. However, mortgage lending rates are included in loan payments become costly to borrowers in the long run. Aspiring home owners who have no available cash to put up during mortgage processing can take advantage of these mortgage packages.

Mortgage packages that charge up front payment of mortgage lending rates during processing stage is costly at the beginning but subsequent payments will be cheaper and easier to handle for borrowers. Also, borrowers can have the option to pay of the mortgage in a shorter period.

Short term mortgage has a higher mortgage lending rates compared to mortgage paid in longer terms. When borrowers decide to choose short term mortgage they must ensure that they have enough money to pay off the higher amount off higher amount of monthly mortgage payments. Short term mortgage can avail lower mortgage lending rates since lenders have the opportunity to get back their investment faster. Long term mortgages, on the other hand, usually results to higher amount of interest payments. It might appear that interest payment is lesser due to lower amount of monthly payments which is actually the reverse. Thus, in the long run choosing short term mortgages will be cost efficient for the borrower.

Whatever option the borrowers choose, it is important to make sure that you have the necessary finances required to pay off monthly loan payments. In the end, it is better to choose long term mortgages than faced financial problems and be at risk of earning negative credit ratings because you cannot afford to pay the monthly payments of short term mortgages.


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