How to become a smart borrower this New Year

Jessica

Hi all,

Many of you must have bought a home this year or may be managing a mortgage since the past few years. As the New Year comes by, there are changes in the housing market, the interest rates and the mortgage industry as a whole. To help you keep up with the upcoming trends, here's a list of the things that you should do to make yourself a smart borrower.

Review your mortgage:

Check if your mortgage still fits your budget and whether you are able to manage it comfortably.
Look before you refinance:

If you are looking to refinance, verify if there is any prepayment penalty and whether you can afford to pay it.
Check the rate adjustment:

Check out the newly adjusted rate if you have an adjustable rate mortgage, especially the hybrid ARMs. This is because for the hybrids, rates may go up from 3% to 3.5%. This rate adjustment is known as the reset. And, for interest only borrowers, this comes out to be double the monthly payment. In this situation, refinance becomes an obvious option provided you can save in the total interest through the process.
Avoid the minimum payment option ARM:

Think twice before you decide to make minimum payments on the Option ARM. This is because in most cases, borrowers end up paying more than they actually owe.
Make extra loan payments:

You may think of making extra payments if you have taken a long term fixed rate loan. But do calculate whether you'll be able to make extra payments monthly, semi-annually or annually.

I hope the above tips will help you to avoid making financial mistakes and manage your mortgage better.

sara · Posted: Mon Jan 01, 2007 4:22 am Post subject: RE: smart borrower tips

Hi Jessica,

That's an interesting topic to start off the new year.

Indeed one needs to take care of his finances, analyze once again if he is able to manage his loan properly or whether he should consider changing the payment scheme.

One may think of refinancing the existing loan but then he should be sure that the savings through refinance will outweigh the closing costs. Otherwise, he can keep the existing loan.

Avoiding the minimum payment option is also a good move. Surely none would like to owe more than with what he started off.

Extra payments is also an option that one should consider. There is the chance of paying off a 30 year loan in less than 25 years after all.

Thanks,

Sara

mcole · Posted: Mon Jan 01, 2007 9:39 am Post subject:

Excellent tips and advice, Jessica. Thank you for sharing.

Hopefully you had a great holiday season and are ready for the new year!

Cool

Jessica · Posted: Mon Jan 01, 2007 9:24 pm Post subject: RE:

Thanks Michael

Yes, I had a great holiday and is looking forward to the new year.

Looking forward to some great mortgage tips from you too.

Regards,

Jessica.

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