Once a survey is complete of the available home-mortgage loans, a detailed investigation is imperative to analyze the various competitive offers. Also to clarify any doubts that may arise, before finally accepting a loan.

Checklist for Home-Mortgage Loans

Is this offer the golden pond?

Out of many sources and schemes, one can always find a home-mortgage offer that appears as if sent from heaven - at first glance! Be pragmatic and look at the various offers once again for plugging all the loop holes there may be, or to understand fully the implications of a particular clause, conditional statement, legal consequence, etc., before taking the final plunge! The under mentioned three points illustrate the clauses one should analyze, compare, and conclude for any home-mortgage scheme that comes your way:

Pre-payment Clause -

This stipulation is still included by some home-mortgage lending companies though it is rapidly becoming less frequent than in the past. As far as possible, one should avoid getting into this clause. What does it mean? Simply, it is an early repayment of the principal amount of the loan because of many reasons linked to interest rates, affluence of the borrower, need for a refinancing, or selling of the property, etc. Home-mortgage lenders are never very happy with this outcome as they lose their main source of income by way of interest revenue accrued in giving a loan - a common economic principle! All said and done, what are the circumstances where one can still accept a pre-payment clause in home-mortgages?

Pre-payment fee is quite low.

As a consequence of the low fee, the rate of interest is also lower than normal.

You are sure that the loan will not be subject to any pre- or early pay back.

Generally acceptance of this so called "penalty" clause is dependent on the flexibility the borrower wishes to have in his home-mortgage loan. If you are sure that you will not be defaulting on this item, there is no harm in accepting it on a shorter term basis of say the first 5 - 10 years of the home-mortgage.

'Point' fees Clause -

This is an important and interesting stipulation in the entire home-mortgage business! It has to do with the relationship of interest rate change and what you put up as an initial amount for your total borrowings. Suppose you are taking a loan at 9 percent interest rate for a specified time span at zero points or are considering another offer of 8 percent at two points. It simply means that for the lower interest rate an upfront payment in cash of two percent is made for the loan amount you have taken. This ensures that your outgo for interest on the home-mortgage will be lower in the long run. It is especially beneficial if your intention is to carry the loan for a period exceeding 7 years or so. In case your purpose is to repay the loan before this period and/or look for a refinancing within this time span, a higher interest rate with 0 points can be tolerated.

Other miscellaneous fees -

Three other 'fees' can be noted for any home-mortgage loan. These are fees for the loan, fees for appraisals you may need, and fees for inspecting the intended property in case of older homes or susceptible areas etc.

The morale of the story is to ensure that each offer in the home-mortgage field is well compared and analyzed! Depending on your overall borrowing capacity, your need of a particular home you have seen, the affluence of the area you wish to reside in, and the prevailing interest rates at any given moment, you can take a decision for the best combination of home-mortgage borrowings available to you.