Comparing Rates, Points And Fees
Mortgages can include hidden fees and express their interest rates in different ways. That is why choosing the best mortgage sometimes turns into a real challenge.
Some of adjustable rate mortgages offer so-called "teaser" rates, which are low short-term introductory rates. Even though they seem to be very attractive, be aware of the period the rate will last.
Discount points are fees that are paid to reduce interest rate. They can be worthwhile if you have a long-period mortgage. In case you want to hold the mortgage for a couple of years, the cost of the discount points may exceed the benefit.
Private mortgage insurance
Private mortgage insurance is required when you borrow with a down payment of less that 20%. Lenders have found that those who put down less that 20% are far more likely to default that those who put down more. You may be required to pay monthly or annual premiums, or have a one-time fee.
Although at first glance the only one who gets the benefit is the lender, you still have an advantage in buying a house with a low down payment. PMI payments don't last throughout the whole life of a mortgage. As soon as the balance hits 80% of the purchase price margin, the mortgage insurance can be terminated. The other options to avoid PVI are: a second mortgage, lender-paid-mortgage insurance, a "piggyback" mortgage.