The prospect of buying a new home or obtaining a loan to make some improvements to a house is exciting, but it is not wise to accept the first offer that comes along. Instead, the client would do well to spend a little time comparing different approaches to the loan. Here are some of the factors to look at closely before making any commitment.
The Terms of a New Mortgage
When the plan is to secure a mortgage for the purchase of a home, feel free to talk with several lenders. The goal is to see who can come up with the best terms, including the rate of interest and as few charges for various services as possible. While this may seem easy on the front end, that is not always the case. A lender who offers what seems to be the lowest rate may also bundle in all sorts of charges like payment processing fees, application fees, and other expenses. Projecting what the loan will eventually cost the borrower is a better way to decide if the loan is really the best choice.
The duration of the loan is another factor to consider. Assuming the interest rate and all other factors are within reason, take the time to use a mortgage calculator to see what the difference would be if the loan came with a twenty year term instead of thirty years. If the monthly payments are still affordable, the borrower stands to save a lot of money on interest charges. In addition, the equity in the home will build up a lot faster.
How About a Loan for Remodeling?
When the plan is to add a room or otherwise remodel the home, checking into options for home improvement loans is a good idea. Start with the lender who holds the mortgage. It may be possible to borrow against the equity and bundle the payment in with the mortgage. Even if this is the case, compare the terms with what other lenders will offer. Doing so will make it easier to know which option is really the most cost effective.
When it comes to loans of any type, always feel free to shop around. At the very least, doing so will ensure that the borrower will know when the loan terms are competitive and when they are not the best option.