Please let us know if you have any remaining questions that are not addressed here. We will be happy to help in any way we can.

  1. What is the difference between a fixed-rate loan and an adjustable-rate loan? click here
  2. How is an index and margin used in an ARM? click here
  3. How do I know which type of mortgage is best for me? click here
  4. What does my mortgage payment include? click here
  5. I’m thinking of selling my house.  Should I sell it myself or use a Realtor? click here
  6. What if I have a Reverse Mortgage and want to move? click here
  7. Should I have my mortgage reviewed and think about refinancing? click here
  8. What considerations are there to be made when thinking about refinancing? click here

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Q: What is the difference between a fixed-rate loan and an adjustable-rate loan?
A: With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.

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Q: How is an index and margin used in an ARM?
A: An index is an economic indicator that lenders use to set the interest rate for an ARM.  Generally, the interest rate that you pay is a combination of the index rate and a pre-specified margin.  Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).

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Q: How do I know which type of mortgage is best for me?
A: There is no simple formula to determine the type of mortgage that is best for you.  This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house.  We can help you evaluate your choices and help you make the most appropriate decision.

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Q: What does my mortgage payment include?
A: For most homeowners, the monthly mortgage payments include four separate parts:

  • Principal: Repayment on the amount borrowed.
  • Interest: Payment to the lender for the amount borrowed.
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes.  This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
  • Mortgage Insurance:  If your loan amount is more than 80% of the property value, mortgage insurance may be required to protect the lender against default.

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Q: I’m thinking of selling my house. Should I sell it myself or use a Realtor?
A: Many people think the choice between a For Sale by Owner and hiring a Realtor is a choice between paying a commission and selling for free. Instead, it is the choice between learning the job of a real estate agent with one listing and no help, or paying an experienced professional to do the job. If you hire the best available agent, you are hiring someone who knows how to do the job and is not learning without supervision.  We recommend speaking with one of these agents.

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Q: What if I have a Reverse Mortgage and want to move?
A: The answer is that the Reverse Mortgage must be paid off when the home is sold.  The process would be the same as with any other mortgage, except the borrower cannot be required to take cash to closing when the home is sold.  If the balance is higher than the proceeds of sale, the proceeds of sale will satisfy the Reverse Mortgage without requiring liquidation of other assets.

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Q: Should I have my mortgage reviewed and think about refinancing?
A: We often encounter people who lack a sense of urgency to either evaluate a refinance or complete the paperwork to do the refinance. In a recent case, we offered a refinance that lowered the interest rate on a $180,000 loan by 1.125% with no closing costs. 1.125% of $180,000 is $2,025/year, $168.75/month, or about $5.55/day. It may be just a Starbucks each day, but when the evaluation is free, it is definitely a great idea to take advantage of our free loan review once or twice per year.

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Q: What considerations are there to be made when thinking about refinancing?
A: When refinancing, it is important to consider any future investing plans. We have seen borrowers refinance into 15 year loans to save money on interest, but when they wanted to buy an investment property, the higher payments blocked them from buying the investment property. When doing a refinance, it is important to look at the total debt structure, including future money needs. It typically costs very little extra to get the money for future needs when refinancing. We like to consider these needs when doing a refinance analysis.
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If you have questions that are not addressed here, please Contact Us and we will gladly answer any remaining questions and include them on this FAQ page.

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