Choosing among mortgage cost options

By Ed Harrigan

The following article was submitted by Ed Harrigan, a local home loan consultant with Countrywide Home Loans and a resident of the Mount Washington Valley since 1997. Consumers need not be relegated to a one-size-fits-all approach when it comes to home loan closing costs associated with refinancing or purchasing a home. The right home loan choice can be radically different from one buyer to the next depending on each consumers unique needs.By becoming familiar with the multitude of mortgage cost options available, consumers can make an informed choice thats right for them now and into the future. The best choice in the long run isnt necessarily the one with the least out-of-pocket costs at the closing table, but rather, the one that brings the best total value over the life of the loan. These mortgage cost options include: No money needed for closing costs. A mortgage lender can pay your closing costs. In this scenario, the lender does not require cash from the borrower to pay fees at the closing table. Instead, the home buyer obtains a loan with a slightly higher interest rate. It can be a smart move for buyers who have little money set aside or who plan to be in a home for a short time because not initially paying closing costs out-of-pocket can more than offset their increased interest expense during the short life of the loan. Reap the rewards of lower interest when you pay closing costs upfront. Buyers who pay loan costs at closing are rewarded with a lower interest rate on their mortgage. A customer who is planning on staying in his or her home for more than a few years may see the benefit of selecting to pay the costs at closing and having a lower interest rate to help them end up paying less over the long term. Minimize your mortgage interest rate. Some homeowners may benefit from paying loan discount points to lower their interest rate. By paying loan discount points, buyers can buy down their mortgage interest rate, a particularly attractive option if the buyer intends to retain the mortgage for more than five years. Mix it up. A combination of a first mortgage and a second mortgage is yet another choice. This option allows many homeowners to avoid private mortgage insurance and enables them to pay down the second mortgage separately. If the second mortgage is a home equity line of credit, borrowers may reuse the available credit in their line as they pay it down. No monthly mortgage insurance payments. In most instances, private mortgage insurance is required when a borrower is unable to make a down payment of 20 percent or more. There are different types of mortgage insurance available to borrowers. A borrower may accept a slightly higher interest rate or pay additional points at closing to avoid paying monthly premiums. All of these options may have some tax advantages, so borrowers are encouraged to consult their tax advisor to learn if they qualify for a tax deduction and the different rules that apply to purchase and refinance transactions.Countrywide offers a full array of mortgage financing options. Additional information about the company's products and services is also available online at www.EdHarriganMortgage.com or by calling Ed Harrigan at (603) 356-5827.