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home buyers information center

August, 1999 Newsletter

The Home Buyer's Information Center Newsletter
<http://www.ourfamilyplace.com/homebuyer>
+++++++++++ August 16, 1999 +++++++++++++++++++

CONTENTS:
Introduction
Mortgage Rate Update
New on the Site: Real Estate and Mortgage Glossaries
Home Buyer's Questions
This Month's Tip: 15 Year Mortgages

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Introduction
Due to some degree to the increases in mortgage rates
(see the next story), Real Estate markets in many
areas of North America have cooled just a bit in the
last month. For buyers, this can be a mixed
blessing. Higher rates may mean higher payments,
but a less active market often means both more
availability of properties and a better bargaining
position.

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Mortgage Rate Update
As of early August, in the U.S., mortgage rates
showed a definate increase from the previous 2 weeks,
averaging in the 7.8% range for a 30 year mortgage
with 1 point. In Canada, 3 year closed term rates
were also in the 7.8% range.

What is fueling the rate increases? Largely it
has to do with inflation fears. Mortgage rates
are closely aligned with inflationary indexes and
the latest news has not been exceptionally good.

Additional mortgage information can be found at:
<http://www.ourfamilyplace.com/homebuyer/mortgage.html>

++++++++++++++++++++++++++++++++++++++++++++++

New on the Site: Real Estate & Mortgage Glossaries

If you are buying a house for the first (or maybe the
second or third!) time, you will quickly be aware that
there are a lot of terms and "lingo" common in the
Real Estate and Mortgage industries that you may not
be familiar with. We've added several new pages with
the most common terms and their definitions.
Real Estate:
<http://www.ourfamilyplace.com/homebuyer/terms.html>
Mortgage:
<http://www.ourfamilyplace.com/homebuyer/glossary.html>

Home Buyer's Questions
We have always had an area where we answered some
of the most common questions posed by home buyers.
We have added the capability within the last week
for you to ask a specific question and we will
either answer it for you or attempt to direct you to
more information. You can find the Questions page at
<http://www.ourfamilyplace.com/homebuyer/questions.html>

++++++++++++++++++SPONSOR++++++++++++++++++++
Sponsor: LendingTree

LendingTree Mortgages
LendingTree Mortgage In this volatile financial and interest rate
environment getting as many loan comparisons as
possible is crucial. At Lending Tree you can submit
one simple loan request form and within a few business days
get up to 4 bona-fide offers from lenders competing for your business.
Get more information here.

++++++++++++++++++++++++++++++++++++++++++++++


This Month's Tip: 15 Year Mortgages
Regular visitors to the Home Buyer's Information
Center know about our advice to always consider a
15 year term when applying for a mortgage. Many
buyers reject a 15 year mortgage without full
investigation because they believe that their
payment will be double that of a 30 year. The
difference in monthly payment (which, depending
on the rate, is often less than a 30% increase
over a 30 year payment) pays huge rewards in the
amount of interest saved. Using an example of a
$125,000 mortgage at 8%, the Principal and
Interest payment on a 30 year term is $917.20 with
a total of payments (if the loan goes to term) of
$330,192. Without even factoring in the potential
lower rate of a 15 year term, the monthly Principal
and Interest payment of $1194.56 converts to a total
of $215,021 and a savings of $115,021!
The savings benefits are obvious, but another big
benefit of a shorter term mortgage is the fact
that your equity will grow at a much faster rate.
More equity equals more options: You have more
flexibility (and more available for a downpayment)
should you decide to move. You have more savings
built into your home should you want or need to
"tap" some of the savings through a home equity
loan. If the market for homes softens a bit,
the more equity that you have available the safer
your position will be.
Of course, not everyone can qualify for the
larger payment that comes with a 15 year
mortgage. Sometimes, due to a borrower's debt
to income situation, the maximum mortgage
amount will only convert to a 30 year mortgage.
Perhaps you simply do not feel comfortable
committing to the higher monthly payment.
Are you stuck paying the larger interest amount?
In most cases, no. Generally, there will be a
provision to pre-pay principal throughout the
term of the loan. At closing time, have your
lender draw up a 15 year amortization (schedule
of payments) table so that you know exactly what
amount of payment will be needed to pay off the
loan in 15 years. If at all possible, make
your payments at the 15 year rate as often as
you can (if you do it every month, you will, of
course, pay off the loan in 15 years). Even
though it takes some discipline, the advantage
of this program is that IF you do not have the
extra payment available on a given month, you
are not locked into the higher payment--your
obligation is only to the 30 year payment
amount.
Another option is, if possible, to consider
a little less house (and price). For some
home buyers, the added security of the 15
year loan will offset some of the amenities
that it would take a 30 year loan to achieve.
This of course is a decision that will be
influenced not only by personal preference but
also by the realities of the current housing
market in your area (it may not be possible to
spend less money and still get the house you need).

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As always, if you have suggestions for improving the
site, or topics you would like to see addressed in
this newsletter (or, if you have used the Home Buyer's
Information Center to successfully purchase a home),
drop us a quick line to
homebuyer@ourfamilyplace.com

Thanks and have a great month!
The Team at the Home Buyer's Information Center

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