The Cost of a Lower Mortgage Down Payment

First-time homebuyers often have difficulty coming up with a down payment for a home loan. This is usually due to their age and income. While these homebuyers often qualify for a mortgage based on their income, debt level, and credit history, they would be denied if lenders held them to a specific down payment requirement.

Many lenders recognize this and have begun extending mortgages to homebuyers that are not able to pay the traditional 20 percent as a down payment. Not having to come up with so much money for a mortgage down payment is a good thing for home buyers. It removes much of the pressure from having to save up such a large amount of money to purchase a home.

What many lenders fail to mention is that not having a mortgage down payment can cost the homebuyer in other areas of the mortgage. Often the costs are disguised in a way that keeps homebuyers from realizing that they have been added in because of the lack of a down payment.

Increased Interest Rates Some lenders make up for the lack of a mortgage down payment in a higher interest rate. A lender can legitimately determine that you are at a higher risk of defaulting on your mortgage based on the lower down payment. In fact, there is a direct correlation between the amount a homebuyer pays in mortgage down payment and the rate of mortgage defaults. Homebuyers that pay lower mortgage down payments tend to default more than those who pay higher down payments.

To make up for the risk associated with the lower mortgage down payment, the lender can charge a higher interest rate to your loan. This increased interest rate means that the cost you pay for your loan is higher than if you had a down payment.

Private Mortgage Insurance Another way that lenders can make up for the lower mortgage down payment is through requiring you to pay private mortgage insurance. Private mortgage insurance, PMI, is required by most lenders when you pay less a mortgage down payment less than 20 percent. PMI protects the lender by paying your mortgage in the event that you are unable to.

The cost of your PMI depends on the amount of the home you purchased and the amount of your down payment. You are able to cancel the insurance once you have gained 20 percent of the mortgage through your down payment and subsequent mortgage payments.

Keep in mind that the lender isn't required by law to cancel it. In fact, some conditions can keep you from canceling the insurance even after you have reached the 20 percent mark. If you have not kept your payments current, you have other liens on the property, or you have a high risk loan, you may not be able to cancel your PMI after you have gained 20 percent in equity.

Even though you don't save up thousands of dollars for a mortgage down payment upfront, you can still end up paying these same thousands in increased interest and private mortgage insurance.

About the Author
Blair Gwilt is the owner of the website, Starting Real Estate Investing. For a free ebook about no money down real estate investing, go to, How To Invest In No Money Down Property

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Bad Credit Personal Loans

At some point during most people's lives there comes a time when borrowing money is the only option. This may be to buy a house, a car, for home improvements or simply to consolidate debts. Persuading financial organizations to lend money, especially large amounts, is easier for some customers than others.

Those who find borrowing particularly difficult are people with a bad credit history. Bad credit includes County Court Judgments (CCJS), decrees and past credit history problems.

However, not all is lost is for people with a credit histor, for they can avail credit personal loans. Never hear of it! Do not worry, we will tell you all about credit personal loans.

A credit personal loan is like any other personal loan that one might have availed of in the past. The only difference is that it is for those people who have a bad credit, or in simpler terms, people with a credit history. There are numerous lenders who are ready to give a personal loan if one has a bad credit history.

These lenders however, usually require the customer to own their own home as protection or mortgage. Repayments are calculated depending on the amount of money required and the length of time the loan would be required for. For example, the longer the loan is borrowed for the smaller the payments are, but the more interest the customer will pay. It is therefore essential, as the home is used as a guarantee, that the borrower is certain that the repayments can be met before an agreement is made.

Some lenders may consider one's credit rating through agencies before sanctioning a personal loan but that in most cases is a formality. Do not forget that they are there to give loan to people with bad credits only.

However, if one has a very bad and unimpressive record in the past, he may be refused but that happens in only exceptional cases and surely, he can get his loan from some other lender. Rate of interests in bad credit personal loans may be high at times because they are being given to someone with a credit history. That is the only disadvantage of otherwise a life-saving loan for many.

On the whole, bad credit personal loan is a boon in disguise for people with bad credit and may do wonders for them by rejuvenating their businesses or consolidating debts.

About the Author
A boat Loan runs an informative website that looks into all aspects of Loans from bad credit to those in need of there first loan. To find out more visit Bad Credit

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