Mortgages Loans, Home Equity Loans, And Refinacing
There are two types of mortgages, fixed rate mortgages and floating rate mortgages. As is obvious from their names, the fixed rate mortgages are ones where the monthly mortgage payment amount remains the same for the entire life of the mortgage i.e. till the end of mortgage term; whereas floating rate mortgages float/ change throughout the life of the home mortgage loan. The mortgage interest rate on the fixed rate mortgage loan is fixed at the start of Connecticut home mortgage loan term. Whereas, the mortgage rate on a floating rate mortgage is dependent on a pre-decided financial index. This predecided financial index factor is on economic, financial, political and many other factors).
So, which type of mortgage is better?
Well, the opinion seems divided and is mainly based on the preferences of the individual who is getting the home mortgage loan. However, the general recommendation is that you should go for a floating rate mortgage loan if you plan to live in the home for a shorter duration. For long durations, you will need to make a decision on how low the current fixed mortgage rate is and whether it’s low enough to be beneficial for locking-in for a long period.
Owning a home is a matter of great pride; and in today’s world, owning a home has been made really easy through mortgages. However, when you buy an home through the home mortgage route, you don’t actually get the total (100%) ownership of the home till you have paid your mortgage completely.
As you make your monthly mortgage payments, your ownership level increases and when you pay back your entire mortgage loan (which might happen 20-30 years after you start your mortgage), you then become 100% the owner. So, mortgages are long term investments where the home is the asset that you create over a long period of time. But that does not mean that you are blocking all your money in the making of an asset that matures over very long term. If you need money during the tenure of your mortgage loan e.g. for home improvements, you can actually make use of your investment (your ownership in the house) in order to get the cash you need. This happens in the form of an home equity loan.
Getting a good mortgage deal is one thing and bettering that mortgage deal is another thing. In simple words, ‘Mortgage refinancing’ means ending your current mortgage to get into another mortgage for the same property.
Of course, you would go for mortgage refinancing only if the current mortgage interest rates are lower than the mortgage interest rates that you are paying on your mortgage which you took a few years back. However, that doesn’t mean that you go for mortgage refinancing every time you find that the mortgage interest rates have gone down a bit. There are costs involved with mortgage refinancing and these costs make mortgage refinancing unfeasible unless the mortgage rates have gone down significantly.
Various mortgage industry analysts suggest different figures for the gap (between current mortgage rates and the rates on your existing mortgage) that would make mortgage refinancing a practical option.