What is a mortgage prepayment penalty and is it generally advisable to get a mortgage that has one?

A prepayment penalty allows the lender to charge a borrower additional interest, typically six months worth, when a morgage is repaid during the penalty period, which is usually somewhere in the first three to five years of the mortgage. If a mortgage does have a prepayment penalty, this is clearly stated within the mortgage disclosures, mortgage note or prepayment penalty rider to the note. The advantage of taking a mortgage with a prepayment penalty is that it could carry a lower rate of interest or you may be permitted to take a it without paying for non-recurring closing costs.

How much money can I borrow with home equity line of credit?

Depending on your your income,credit history, and the amount of your debt, home equity lenders could lend you up to 80% of value of your home less the amount owed on your mortgages.

Should I lock my interest rates at mortgage application or float the rate until closing?

The answer depends on one's outlook for interest rates, whether you are satisfied with the current rate being offered (and would not be deterred from proceeding if rates declined), when you need to close and whether or not a rate increase could effect your ability to qualify for the mortgage. With a purchase, there is a contractual obligation to close on a specified date. With a refianance transaction, there is no such obligation to close and therefore a home mortgage refinance applicant could postpone closing for a more favorable rate. Some lenders take the guesswork out of the process by allowing borrowers to lock and then float the rate down one time during the mortgage process.

What is the difference between 0 point and no cost mortgage?

With no cost mortgage, a borrower has accepted a higher interest rates, with the trade off that the lender or broker will pay for all their non-recurring closing costs. With 0 point mortgage, a borrower has opted not to pay points to buy their interest rates down but will still be paying for their base closing costs.

What is an interest only home loan?

An interest only mortgage is loan with which you can just pay the interest or the interest and portion of the principal whenever you want during the predesignated amount of time. These loans can be 20-year fixed or adjustable rate mortgages.

How much Homeowner's insurance coverage do I need to get new mortgage?

A safe bet is to buy a guaranteed-replacement-cost policy that will generally pay out 20-50% more than the face value of the policy to rebuild your home (this is also the preferred policy of mortgage lenders). A replacement-cost policy typically adjusts the amount of insurance each year to keep pace with rising construction costs in your area. It is important to note that local building codes require structures to be built to specific standards which could vary over time, if your home is severely damaged, you may be required to rebuild it to current codes. Even guaranteed-replacement-cost polices do not always cover this expense. However, many insurers offer an endorsement that will pay for the upgrading cost, it is a good idea to consider adding such an endorsement to your replacement-cost policy.

How much will closing cost?

Generally you will need around 2% of the purchase price to cover the time between when you close and your first mortgage payment. But when refinancing , your old mortgage should have money in escrow to cover these costs.

What should I get in writing when getting a loan?

If your loan is primarily for personal or family needs, the lender is required to give you a disclosure form before you sign the documents.This disclosure form should tell you the actual cost of the loan. It should include the finance charge, the annual percentage rate and the all the other fees included.

Will my interest rate for second mortgage change?

If your loan is fixed-rate, the interest rate is set for the duration of the loan. Many lenders will offer variable rate mortgages, and these can provide for periodic interest rate changes. If your contract lets your lender adjust the interest rate, make sure to understand when excatly can the lender change the interest rate and if there are any limitations on how much the rate can change.

Why do I need to pay for another policy of title insurance when we already own the property?

Before closing your new mortgage, your new mortgage lender must be certain that the title to the property will be free and clear, free of prior defects and indebtedness. A new policy is needed to protect the new mortgages lender and subsequent investor of your new mortgage. Both a homeowner and prospective lender need to be certain that what is available on the property is what is referred to as a "marketable title". A title company researches the legal history of the property that entails searching public records in the offices of the county recorder. Problems with the title could threaten the mortgage, limit ones use and enjoyment of the property and could result in financial loss. A policy of title insurance protects a homeowner's title and the insurer covers the cost of any legal challenges.

How do I choose a second mortgage lender?

If you are looking for a lender, make comparisons between them. Look for interest rates,and origination fees, closing costs and repayment terms. Check with your local banks, credit unions and finance companies about their loan terms.