Whether you're shopping for your first home or refinancing your present home, Campus Federal provides competitive mortgage rates and financing options. We offer flexible terms for traditional and adjustable rate mortgages. Allow us to find the perfect mortgage for your situation.
With the hundreds of financial institutions in the marketplace offering mortgages, put your relationship with Campus Federal to great use. We've helped thousands of members through the tedious process of finding the right mortgage loan. We work diligently every day to find the correct solution for our members' needs, while streamlining the entire loan process. Make your mortgage decision with your trusted financial partner, Campus Federal.
Fixed Rate Mortgages
As the name implies, with a fixed rate mortgage, the interest rate is "locked in" at the time you take out the mortgage and remains constant over the life of the mortgage. The monthly payment level also remains constant. This provides a benefit of knowing what your payment will be each month.
Most financial institutions offer fixed rate mortgages of 30-years and 15-years, respectively. The benefit of the shorter 15-year mortgage is that after 15 years you will own your home free and clear. This shorter term mortgage provides an overwhelming reduction in interest over the life of the mortgage. Let a Campus Federal representative help find the right mortgage for you.
Choosing the term of a fixed rate mortgage is usually a function of what level of monthly payments you can afford and how anxious you are to pay off the entire mortgage.
Adjustable Rate Mortgages (ARMs)
With an adjustable rate mortgage, the interest rate and monthly payments can change as interest rates change. The rate is fixed initially and is subject to being reset based on changes in some interest rate benchmark. The big benefit to the borrower is that usually ARMs have interest rates (at least initially) that are lower than the rates on fixed rate mortgages. Sometimes it can even be 1½ % to 2½ % less.
There are several features of ARMs that you should evaluate if you are considering this type of mortgage.
- Initial rate: Be careful if the initial rate seems really low. It could be a "teaser" rate that only lasts for a short time and then the rate is adjusted upward. At a minimum, ask what the rate would be adjusted to if the initial rate ended today.
- Benchmark the ARM is pegged to: ARM rates are usually tied to some "published" index that reflects the general interest rate market. Usually the ARM rate is adjusted to that benchmark plus some level of margin. Ask the lender how this works and try to get an understanding of how the benchmark rate has changed recently.
- The cap: Most ARMs have limits on how much the rate can rise in any one year and some ARMs have a limit to what the rate can rise to over the course of the mortgage. Understanding how the caps work will let you know "how bad it can get" if rates rise substantially.
- Length of the rate periods: When researching ARMs, you may find that there are various terms. These refer to how long the initial rate lasts and how often the rate is adjusted after that.
Adjustable rate mortgages are attractive because of their lower initial rate. Your risk is that your rate and monthly payment will rise in the future. If you are comfortable that you can accept an increased payment or if you think you will be moving in a relatively short time, the savings with an ARM can be substantial.
Refinance — Should You Refinance Your Home Mortgage ?
Housing costs are one of the largest components of most household budgets. With interest rates changing so frequently, you should periodically determine whether refinancing at current interest rates would save you money. Here at Campus Federal, we can help you determine if refinancing is in your best interest.
To determine whether you should consider refinancing, compare the costs of obtaining a new mortgage with the savings you will enjoy with a reduced interest rate. You may also want to consider refinancing to a different type of mortgage, such as switching from an ARM or 5-year balloon to a 15-30 year fixed rate mortgage.
Here is an example and a worksheet that will help you determine if refinancing makes sense for you. Rick and Carol have a home they bought 3 years ago for $300,000 and they have 5 years remaining on their balloon mortgage of $200,000 with an interest rate of 7.25%. Their monthly payments are $1364.35. They intend to live in their home for several years and would like to lock in a 30-year mortgage with a 6.25% fixed rate.
|New Mortgage Costs||Calculating the Savings|
|Discount points (in $)||—||Monthly payment on current mortgage||$1364.35|
|Origination points (if any)||$2000.00||Monthly payment on new mortgage||$1241.43|
|Application fee||$200.00||Difference between two mortgage payments||$132.92|
|Credit check fee||$50||Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs.||34 months|
|Attorney fees (yours)||$500|
|Attorney fees (lender's)||$ —|
|Title search fee||$ —|
|Title insurance fee||$900|
|Local fees (taxes, transfers)||$400|
|Total cost of new mortgage||$4570|
In this example, Rick and Carol would save over $1600 annually in mortgage payments and lock in a 30 year fixed rate mortgage. Over the course of the mortgage they would pay about $48,000 less in total interest.
When reviewing the feasibility of refinancing, you may also wish to consider refinancing a larger or smaller amount than the current balance of your mortgage. If you have excess funds available and believe you will have a hard time earning a return greater than the mortgage rate, you may want to pay down your mortgage and get a new mortgage that is smaller. If you have other liquidity needs, you may want to refinance a larger amount to free up some of the equity in your home.
Remember that mortgage interest is tax deductible if you itemize your deductions on your tax return. Consult your tax advisor to see how this may apply to your situation.
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