Fixed Rate Home Mortgage
With our Fixed Rate Home Mortgage, your monthly principal and interest payment are fixed for the life of your loan. It makes managing your money simpler because this element of your monthly budget always stays the same.
What is the difference between the interest rate and the annual percentage rate (APR)?
Interest rate is the contractual rate that you agree to pay for your mortgage loan. This rate is used to calculate the interest portion of your monthly mortgage payment. Annual percentage rate (APR) includes your interest rate and factors in the prepaid finance charges to give you an average yearly rate. APR can be a good tool to use when you're comparison-shopping for rates.
What if mortgage rates change before I close on my home loan?
At Eden Rock Mortgage, you automatically receive a 30-day commitment that locks in your interest rate from the date that you apply. If the rate goes up before closing, you will retain the rate you obtained at the time of application. If you need additional time or less time we can accommodate you as well.
What costs are involved in getting a mortgage?
Here's what you'll have to pay when you close on a mortgage loan:
Down Payment: Money that's due up front on the home purchase. It will decrease the amount of money you need to borrow. You can put down as little as 3%, although many people put down between 10% and 20%. For example, if you buy a home for $100,000 and have $10,000 for the down payment, you're putting 10% down and will have to finance $90,000 with a mortgage.
Private Mortgage Insurance (PMI): This is insurance provided by a private company that protects lenders like Third Federal against loss in case a borrower defaults on the mortgage loan. Most banks require that you put 20% down to waive PMI. But at Third Federal, you can avoid paying PMI with as little as 3% down.
Closing Costs: These include fixed costs (application fee, loan origination fee, document preparation fee and escrow fee) and variable costs (fees for appraisal, credit report, flood zone determination, doc. stamps, intangible tax, Florida 9 Endorsement, pest inspection, recording fees, survey and final review). Closing costs vary by lender.
Prepaid Interest: This amount varies, depending on when your mortgage loan is filed with the county recorder's office. You will be charged interest from the date the mortgage loan is filed to the end of the month. That can be between one day and 31 days of interest. For example, if your mortgage loan were filed on the 15th of the month, you would be charged for 13-16 days of interest in escrow (depending upon the month when it was filed). Your first mortgage payment would be due on the first day of the second month following the recording of your mortgage. For example, if your mortgage loan were recorded on January 15, you would pay 16 days of interest when the loan is closed. The first monthly payment would be due March 1.
Title Insurance: An insurance policy that protects the buyer, mortgagee or other party from financial losses resulting from problems or defects with the property's title.
Points: This is a one-time charge that you can choose to pay in order to lower the interest rate on your loan. Each point is equal to one percent of your loan amount. For example, if your loan amount is $90,000, then one point is equal to $900. You can select zero, one, two or three points to pay on your fixed rate loan. Each additional point lowers your interest rate a little more.
Tax Reserve: If the ratio of your loan to the value (LTV) of your property is greater than 70%, Third Federal requires that your real estate taxes be collected monthly with your mortgage payment. Your real estate taxes are held in escrow until your municipality requires payment. Third Federal will then issue payment for your real estate taxes on your behalf. The number of months to be held in escrow to set up the tax reserve will be based on when the loan is filed and when the next tax bill is due. The dollar amount collected each month for the tax reserve will be based on the last available tax bill. If you prefer to pay your own real estate taxes and have a loan-to-value ratio of less than 70%, Third Federal will consider your request on an individual basis.
ARM Loans (Adjustable Rate Mortgages)
Adjustable Rate Mortgages are a great option. Most times, they offer lower interest rates than fixed rate mortgages.
Some important things you will need to consider when choosing an ARM loan:
How long will the interest rate be fixed?
You can choose an ARM loan which can be fixed for anywhere from 6 months to 10 years. After the fixed rate term is expired, the interest rate may adjust.
How often will the interest rate adjust?
After the first rate adjustment, ARM loans can adjust every month, once every six months or once per year. Your financial consultant can tell you what your particular adjustment periods will be. For example: if you have a 3/1 ARM, the interest rate will be fixed for the first 36 months, at the end of 36 months, the rate could adjust. The new interest rate will be fixed for the next year (hence the 1) and at the end of 12 months; you could see another rate adjustment.
How high could my interest rate go?
You will have set rate "caps" on your ARM loan. These caps will govern the maximum amount the rate could go up at each rate increase, and the highest the rate will ever go as long as you have the mortgage. First, you will have an "adjustment cap". For example, if your "adjustment cap" is 2%, you the borrower can be assured no matter what is going on in the market, your interest rate will never go up more than 2% each time your loan adjusts. Secondly, you will have a "life cap" or "life of loan cap". This lets you know the maximum the interest rate will go up over the entire "life" of the mortgage. For example, if your "life cap" is 6%, you can be assured, your interest rate will never increase more than 6% over your starting (or initial) interest rate.
How does my mortgage lender determine how much my rate will adjust?
All ARM loans will have an "index". The index is the "guide" the bank will use to determine when, and if there will be a rate adjustment. Some common "indexes" are the LIBOR, and the TREASURY BILL (from the 1 month treasury bill to the 1 year). Put simply, the bank cannot just decide "time for a rate increase". Around your adjustment date, you will receive a statement letting you know what your new interest rate will be, how it was determined, and what your new payment will be. Simply, on an ARM loan, INDEX + MARGIN + (not to exceed "caps" in place) = INTEREST RATE. Your financial consultant can provide you with a "history of index" (how your proposed "index" has performed over the last 10 years) so you can make an educated decision when choosing your index. Some may offer lower initial rates, but may be more apt to go up and down than others.
How much over the current index will I pay?
You will be "assigned" a margin at the time you sign your ARM loan. The margin will NOT change. This is the amount over the index your interest rate will be. For example, if your "index" is 4% and your "margin" is 2% your interest rate will be 6%.
How do I determine if an ARM loan is right for me?
Your financial consultant can help you with this decision, carefully weighing out all of your options with you. For example, some clients know they want to sell their home within the next 2 years; a 2 year fixed rate would be perfect. They will probably sell before the 2-year fixed term is up, and their interest rate for the next 2 years will be lower then if they had chosen a fixed term!
There are several types of ARM loans; these are currently the most popular options;
1) Short Term Fixed Rate ARM- these mortgages offer a fixed rate for a period of time typically, 1, 2, 3, 5, 7 and 10 years before the first adjustment.
2) Payment Option ARM (also known as CASH FLOW or PERSONALLY TAILORED)- Offers more than one payment choice each month. CLICK HERE for more information on this type of ARM.
Interest Only Mortgage Loans
Interest Only Mortgages have become a very popular choice. Interest Only Mortgages give you the option of paying only interest payments on your mortgage. Keep in mind, if you are paying the interest only payment, there will be no principle reduction and your mortgage balance will remain pretty much the same throughout the interest only period.
Most of these loans allow you to pay additional principle payments in addition to the interest if you choose, however, the minimum amount due is only the interest offering you a much lower minimum payment due each month.
Interest only loans usually offer a five to ten year interest only period, and then they convert to a full principle and interest payment for the remainder of the term of your loan.
