This is How to Understand the Structure of Your Home Loan - Part 1 via @homebidz

Why You Need to Understand Your Mortgage Lock-In Period

When you take out a mortgage loan for a certain period of time, the lender will guarantee a specified interest rate. It is important that you let this lock-in period work for your best advantage during the amount of time your interest rate is guaranteed. Because every loan is different, it's not possible to give you personalized guidance. Let this serve as a guide to make sure you make the right financial moves.

Understanding Your Loan

Sit down with all of your mortgage information and do all of the relevant math. How much interest are you paying per payment, and how much of your payment is going toward the actual amount of the loan? Now that you know this, consider the same questions with a higher interest rate. Is the difference worth the time and paperwork it would require to refinance prior to the lock-in period with a new lender?

Your Credit Score

Remember, if you're making your monthly loan payments on time each month, they are benefiting your credit score. A higher credit score correlates with better interest rate offers. It may be self-sabotage to ignore potentially thousands of dollars you could be saving after your lock-in period is lifted. That's why it's important to look into various loan companies to see which one can offer you a fixed mortgage payment with low closing costs. If you resorted to creative funding, you may have less options for better loans, especially if the lock-in period for your mortgage was less than a couple of years. Even so, it's still worth looking into.

Re-financing isn't just for paying off debt, remodeling, or home repairs. It's also very helpful when you want to lock in a mortgage rate so you don't have to worry about your rate jumping higher in the future. Check with various lenders to see what your options are.

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