Buy-to-let mortgages with HSBC Expat – Types of rate – HSBC Expat, types of mortgages.#Types


Buy-to-let mortgages with HSBC Expat – Types of rate

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Types of mortgages

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Types of mortgages

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  • Buy to let mortgages

    Buy to Let rates

    HSBC are not able to provide mortgages to residents of all countries. Subject to confirmation that you meet the applicable eligibility criteria and depending upon your country of residence, individual circumstances and your requirements buy to let mortgages may be provided by either HSBC Expat or HSBC Bank plc, based in the UK.

    Choose between tracker or fixed interest rates

    HSBC Expat and HSBC Bank plc, in the UK, offer tracker interest rates. HSBC Bank plc, in the UK, also offer fixed interest rates. Before you proceed with a mortgage you should make sure you can afford the monthly payments.

    Tracker interest rate

    Available from HSBC Expat

    The tracker mortgage interest rate is set at an agreed percentage above the Bank of England base rate. The monthly payments rise and fall (track) in line with changes to the base rate.

    • No early repayment charge
    • Make unlimited overpayments
    • Make lump sum reductions
    • Repay your loan at any time

    The following tracker mortgage interest rates are available from HSBC Expat Only:

    The Bank of England Base Rate is set by the Bank of England. HSBC Tracker mortgage interest rates are linked with a margin above this Base Rate.

    This is the percentage rate at which the lender calculates the interest that is charged the borrower on a mortgage.

    APR stands for the Annual Percentage Rate of charge used to compare loan offers.

    The period during which the fixed or tracker rate applies. Following the expiry of the fixed rate period, the mortgage rate will revert to the HSBC buy to let mortgage variable rate.

    A fee charged on some mortgages to secure a particular mortgage deal and/or to cover administration costs.

    The fee charged for the administration involved in arranging the loan.

    The maximum amount that can be borrowed with this product.

    For information on the tracker mortgage interest rates available from HSBC Bank plc, in the UK visit:

    Fixed interest rate

    Available from HSBC Bank plc, in the UK, only.

    A fixed rate mortgage provides the security of fixed mortgage payments until an agreed date, no matter what happens to interest rates. HSBC Bank plc, in the UK fixed rate mortgages revert to the HSBC variable rate at the end of the fixed rate period.

    An Early Repayment Charge applies if you increase your standard monthly payment by more than 20% or you repay (by any other method) all or part of your mortgage, over and above your standard monthly payment, during a fixed rate period.

    For information on the fixed mortgage interest rates available from HSBC Bank plc, in the UK visit:

    Understanding fees

    A number of different fees are chargeable for different types of mortgages. The table below explains some of the fees involved and provides amounts where possible.

    A non refundable fee charged on some mortgages to secure a particular mortgage deal and/or to cover administration costs.

    The fee charged for the administration involved in arranging the loan.

    The fee charged by a lender who, with the customer’s written consent, requests details from their existing mortgage lender.

    A Completion fee is a fee the lender charges to cover the cost of electronically transferring the mortgage funds to the borrower.

    Also referred to as a professional valuation, a Standard Valuation Fee is a fee to cover the basic valuation of a property conducted on behalf of a mortgage lender to enable them to assess the security offered by the property for the proposed mortgage.

    An exit fee is a fee charged by many institutions when you fully repay your mortgage. HSBC Bank do not charge an exit fee.

    Standard Valutation fee scale

    The current fee, including VAT (UK only), for HSBC Expat, Buy to Let property valuations is detailed below. Fees are subject to change, therefore, please refer to your Key Facts Illustration for details of the fees payable by you. The valuation fee quoted includes a 35 non-refundable administration fee. Please note this fee scale is not applicable to properties in the Channel Islands and Isle of Man. For such properties please refer to your local HSBC Bank plc, in the UK branch.


    Mortgage Advice That You Can Trust – Mortgages-OnlineMortgages-Online, Mortgage Advice and Arranging, types of mortgages.#Types


    Mortgage Advice That You Can Trust

    Mortgages-Online are a team of mortgage advisers providing mortgage advice NATIONWIDE by remote means. Mortgage advice is delivered via the Internet, telephone and sometimes face to face. We have a wealth of experience having provided online mortgage advice since 1997.

    A professional mortgage broker is likely to save you money when a arranging your mortgage. Unlike a lender that can only offer a limited range of mortgages, Mortgages-Online can choose from thousands of mortgages from many lenders. With such a vast choice of mortgage products you can be confident of finding the best mortgage.

    It can be time consuming if you have to provide information to more than one lender. Once we understand your needs Mortgages-Online will eliminate lenders that cannot help, determine which lender is the most suitable and then make an application on your behalf. It s all rather painless and we can apply this principle the next time you apply for a mortgage, saving you time both now and in the future.

    What next?

    Either telephone and speak directly with a mortgage adviser or complete an enquiry form and we will contact you.

    Our initial consultation is FREE and we will be able to tell you immediately whether or not we can help. If we can help then we will need to gather some fairly detailed information; this is something that every lender and mortgage broker must do.

    We can start the mortgage application process either before or after you have found a property. Throughout the process we will liaise with the lender and any third parties to keep you updated.

    We can also help you with life assurance, buildings and contents and finding a solicitor if you do not have one in mind. We offer a one stop shop for friendly, unbiased mortgage advice that you can trust.

    YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

    Mortgages-Online is authorised and regulated by the Financial Conduct Authority, No. 442328. Some of our services may not be regulated by the Financial Conduct Authority.

    Initial consultation is free. If you decide to proceed with our service then a fee may be charged for our advice. See Charges.

    We can recommend mortgages from the whole of market.

    Your details remain confidential and are not shared with third parties except solely for the purpose of arranging a mortgage and related products that you purchase through us.


    Types of mortgages, types of mortgages.#Types #of #mortgages


    Types of mortgages

    Get a low interest rate guaranteed for 5 years, predictable fixed payments, and the flexibility to prepay annually a portion of your mortgage ahead of time.

    • Choose terms of 6 months to 10 years
    • Enjoy a lower interest rate and predictable payments
    • Prepay or increase payment amounts by up to 20% once per mortgage year
    • Cash back option available*
    • Learn more
    • Apply now
    • Choose an open- or fixed-term mortgage of 5 years
    • Benefit from a lower interest rate and predictable payments
    • Choose an amortization of up to 30 years
    • Convert to a fixed-term mortgage any time
    • Learn more
    • Apply now
    • Share the deposit, mortgage, and other costs with one or more co-owners
    • Get flexible payment options, portability, assumability, and competitive rates
    • Gain peace of mind knowing each owner is covered by life insurance
    • Learn more
    • Look into home equity loans and other options
    • Consider a lower-interest Bright Ideas loan for energy-saving renovations
    • Learn more
    • Look into a range of environmental financing options, including the Bright Ideas home renovation loan
    • Save money on your CMHC high-ratio mortgage insurance
    • Take advantage of rebates and incentives from BC Hydro, FortisBC, and more
    • Learn more
    • Apply now

    *Take out a 3, 4, 5, 7 or 10-year fixed-term mortgage, and we will give you cash back in an amount of up to 5% of the mortgage principal, or up to 2% of the mortgage principal for laneway mortgages transferred from another institution. Cash back is paid on the date the mortgage is funded. If the mortgage is not funded, no cash back will be paid. If you choose to break your mortgage commitment for any reason prior to maturity, you will be required to repay a portion of the cash back received.


    Buy-to-let mortgages with HSBC Expat – Types of rate – HSBC Expat, types of mortgages.#Types


    Buy-to-let mortgages with HSBC Expat – Types of rate

    Please enable cookies

    To use online banking you need to allow this website to use cookies. This setting is usually found in your browser’s privacy or security settings. If you have cookies disabled you will still be able to use the HSBC Expat website but online banking will not be available and some other features may not work as expected.

    Types of mortgages

    • Why HSBC Expat

    How you can benefit

    Types of mortgages

    • Online Banking
    • Mobile Banking
    • International offices
    • Contact us 24/7
    • Types of mortgages
    • Your guide to buying to let in the UK Download now
  • Solutions for your future

    Guides and tools for expats

    • Planning to move abroad
    • Just arrived in a new country
    • Experienced expat
    • Moving back home
    • Expat life is.
    • Types of mortgages
    • A Different Perspective: Expat life Watch the video
  • Buy to let mortgages

    Buy to Let rates

    HSBC are not able to provide mortgages to residents of all countries. Subject to confirmation that you meet the applicable eligibility criteria and depending upon your country of residence, individual circumstances and your requirements buy to let mortgages may be provided by either HSBC Expat or HSBC Bank plc, based in the UK.

    Choose between tracker or fixed interest rates

    HSBC Expat and HSBC Bank plc, in the UK, offer tracker interest rates. HSBC Bank plc, in the UK, also offer fixed interest rates. Before you proceed with a mortgage you should make sure you can afford the monthly payments.

    Tracker interest rate

    Available from HSBC Expat

    The tracker mortgage interest rate is set at an agreed percentage above the Bank of England base rate. The monthly payments rise and fall (track) in line with changes to the base rate.

    • No early repayment charge
    • Make unlimited overpayments
    • Make lump sum reductions
    • Repay your loan at any time

    The following tracker mortgage interest rates are available from HSBC Expat Only:

    The Bank of England Base Rate is set by the Bank of England. HSBC Tracker mortgage interest rates are linked with a margin above this Base Rate.

    This is the percentage rate at which the lender calculates the interest that is charged the borrower on a mortgage.

    APR stands for the Annual Percentage Rate of charge used to compare loan offers.

    The period during which the fixed or tracker rate applies. Following the expiry of the fixed rate period, the mortgage rate will revert to the HSBC buy to let mortgage variable rate.

    A fee charged on some mortgages to secure a particular mortgage deal and/or to cover administration costs.

    The fee charged for the administration involved in arranging the loan.

    The maximum amount that can be borrowed with this product.

    For information on the tracker mortgage interest rates available from HSBC Bank plc, in the UK visit:

    Fixed interest rate

    Available from HSBC Bank plc, in the UK, only.

    A fixed rate mortgage provides the security of fixed mortgage payments until an agreed date, no matter what happens to interest rates. HSBC Bank plc, in the UK fixed rate mortgages revert to the HSBC variable rate at the end of the fixed rate period.

    An Early Repayment Charge applies if you increase your standard monthly payment by more than 20% or you repay (by any other method) all or part of your mortgage, over and above your standard monthly payment, during a fixed rate period.

    For information on the fixed mortgage interest rates available from HSBC Bank plc, in the UK visit:

    Understanding fees

    A number of different fees are chargeable for different types of mortgages. The table below explains some of the fees involved and provides amounts where possible.

    A non refundable fee charged on some mortgages to secure a particular mortgage deal and/or to cover administration costs.

    The fee charged for the administration involved in arranging the loan.

    The fee charged by a lender who, with the customer’s written consent, requests details from their existing mortgage lender.

    A Completion fee is a fee the lender charges to cover the cost of electronically transferring the mortgage funds to the borrower.

    Also referred to as a professional valuation, a Standard Valuation Fee is a fee to cover the basic valuation of a property conducted on behalf of a mortgage lender to enable them to assess the security offered by the property for the proposed mortgage.

    An exit fee is a fee charged by many institutions when you fully repay your mortgage. HSBC Bank do not charge an exit fee.

    Standard Valutation fee scale

    The current fee, including VAT (UK only), for HSBC Expat, Buy to Let property valuations is detailed below. Fees are subject to change, therefore, please refer to your Key Facts Illustration for details of the fees payable by you. The valuation fee quoted includes a 35 non-refundable administration fee. Please note this fee scale is not applicable to properties in the Channel Islands and Isle of Man. For such properties please refer to your local HSBC Bank plc, in the UK branch.


    Types of Mortgage Loans, KeyBank, types of mortgages.#Types #of #mortgages


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    First-Time Homebuyer

    Experienced Homebuyer

    Refinance

    Which of our mortgages is right for you?

    Conventional Fixed Rate Mortgage

    You plan to stay in your home for more than a few years.

    Rate remains the same for the term of the loan.

    Allows for easier budgeting.

    Conventional Adjustable Rate Mortgage

    You may want to sell or refinance early and can afford to make larger monthly payments should interest rates rise.

    Interest rate adjusts periodically to reflect market condition within a predetermined time frame, and there may not be a cap on interest rate increases.

    Lower initial rate can be locked in for different time periods, after which the interest rate and monthly payments may change.

    Government (FHA/VA/HomeReady ® )

    You qualify based on income and other factors.

    You qualify for a VA home loan as a veteran or reservist.

    FHA loans offer low down payment options and the ability to use gift funds for down payment and closing costs.

    VA loans are partially guaranteed by the VA, so private lenders can provide better terms like 100% loan-to-value without mortgage insurance and no down payment in most cases.*

    Jumbo Loan

    You are in the market for a higher priced home.

    Loan amounts up to $3.5 million with fixed- and adjustable-rate options.

    SilverKey available for single family attached and detached, condos and Planned Unit Developments (PUDs).

    GoldKey exclusive to Key Private Bank clients and for up to 90% LTV to $1 million with no PMI required.

    Combination

    You have funds for a 10% down payment.

    You’ll have 2 simultaneous mortgages, one for 80% of the home’s value (LTV) and one for 10% LTV. The remaining 10% is your down payment.

    Eliminates the need for Private Mortgage Insurance (PMI)

    Community Professional

    You qualify based on income, location or profession.

    Community loans may offer low down payments.

    Professional loans are tailored to financial realities of doctors and dentists.

    State Bond

    You are qualified as a first time home buyer in the state.

    Various programs with features including competitive rates.

    We’re in your neighborhood!

    Have all your questions answered by an experienced mortgage loan officer near you.

    Mon-Fri 8 a.m.- 8 p.m. EST

    *Unless required by the lender, or if the purchase price exceeds the reasonable value of the property as determined by VA, or the loan is made with graduated payment features

    NOTICE: This is not a commitment to lend or extend credit. Conditions and restrictions may apply. Information and offer are subject to change without notice. All loans are subject to credit and collateral approval.


    Types of mortgages, types of mortgages.#Types #of #mortgages


    Types of mortgages

    Get a low interest rate guaranteed for 5 years, predictable fixed payments, and the flexibility to prepay annually a portion of your mortgage ahead of time.

    • Choose terms of 6 months to 10 years
    • Enjoy a lower interest rate and predictable payments
    • Prepay or increase payment amounts by up to 20% once per mortgage year
    • Cash back option available*
    • Learn more
    • Apply now
    • Choose an open- or fixed-term mortgage of 5 years
    • Benefit from a lower interest rate and predictable payments
    • Choose an amortization of up to 30 years
    • Convert to a fixed-term mortgage any time
    • Learn more
    • Apply now
    • Share the deposit, mortgage, and other costs with one or more co-owners
    • Get flexible payment options, portability, assumability, and competitive rates
    • Gain peace of mind knowing each owner is covered by life insurance
    • Learn more
    • Look into home equity loans and other options
    • Consider a lower-interest Bright Ideas loan for energy-saving renovations
    • Learn more
    • Look into a range of environmental financing options, including the Bright Ideas home renovation loan
    • Save money on your CMHC high-ratio mortgage insurance
    • Take advantage of rebates and incentives from BC Hydro, FortisBC, and more
    • Learn more
    • Apply now

    *Take out a 3, 4, 5, 7 or 10-year fixed-term mortgage, and we will give you cash back in an amount of up to 5% of the mortgage principal, or up to 2% of the mortgage principal for laneway mortgages transferred from another institution. Cash back is paid on the date the mortgage is funded. If the mortgage is not funded, no cash back will be paid. If you choose to break your mortgage commitment for any reason prior to maturity, you will be required to repay a portion of the cash back received.


    Types of Mortgage Lenders #mortgage #claculator


    #direct mortgage lenders

    #

    Types of Mortgage Lenders

    Mortgage bankers are essentially mortgage lenders that originate and sell their loans in pools on the secondary market to investors such as Freddie Mac and Fannie Mae, along with private investors. If they are non-depository institutions, they finance the loans with warehouse lines of credit extended by other lenders, but quickly sell them off on the secondary market so they can originate new loans. Countrywide and Wells Fargo Home Mortgage are two are the largest examples, though much smaller operations also share this distinction.

    Portfolio Mortgage Lenders

    Portfolio mortgage lenders originate and fund their own loans, and may service them for the entire life of the loan. Because they typically offer deposit accounts to consumers, they are able to hold onto the loans they fund. They are also able to offer more flexibility in loan products and loan programs because they don t need to adhere to the guidelines of secondary market buyers. That means unique program guidelines and special offerings that other banks can t offer. Once their loans are serviced and paid for on time for at least a year, they are considered seasoned and can be sold on the secondary market more easily. Countrywide and Washington Mutual are examples of portfolio mortgage lenders.

    Correspondent Mortgage Lenders

    Correspondent mortgage lenders originate and fund loans in their own name, then sell them off to larger mortgage lenders, who in turn service them, or sell them on the secondary market. The loans can be underwritten by the correspondent mortgage lenders, but the loan programs are usually based on terms approved by the larger mortgage lender, or sponsor . Correspondents usually have a array of products from different sponsors, and act as an extension for those larger lenders. In other words, a small correspondent mortgage lender may resell Wells Fargo products and/or Countrywide products under their own name.

    Direct Mortgage Lenders

    A direct mortgage lender is simply a bank or lender that works directly with a homeowner, with no need for a middleman or broker. Mortgage bankers and portfolio lenders usually fall under this category if they have retail operations. Examples include Washington Mutual, Wells Fargo and Bank of America, though smaller entities could share this distinction as well.

    Wholesale Mortgage Lenders

    Wholesale mortgage lenders are similar to mortgage bankers in that they originate and service loans, and sell them on the secondary market. Most mortgage bankers have wholesale and retail divisions, although wholesale lenders can be independent entities as well.

    A wholesale mortgage lender works with independent mortgage brokers and loan officers to originate loans. Brokers and loan officers work on the retail end with borrowers, and once they secure a deal, they send that deal to a wholesale mortgage lender for underwriting and processing. The wholesale mortgage lender will fund the loan, and usually sell it on the secondary market within a month or two.

    Warehouse lenders provide financing to other mortgage lenders so they can originate their own mortgages. This short-term funding provides smaller lenders with liquidity so they can focus on making more mortgages while selling existing ones on the secondary market.

    Smaller mortgage bankers and correspondent lenders rely on warehouse lines of credit to finance their operations. They pay back the warehouse lines of credit whens loans are sold, and may give a cut to the warehouse lender for each loan that is eventually sold. The mortgages are used as collateral for the temporary financing.

    Subprime Mortgage Lenders

    Subprime lenders tend to focus on homeowners with less than stellar credit. While the definition of subprime varies from lender to lender, most in the industry characterize it as lending to borrowers with credit scores below 620. But other issues may persist, including limited income and assets, or inability to provide documentation. As a result, interest rates provided by subprime mortgage lenders will be much higher than those at standard lenders. Essentially, subprime lenders are willing to take on more risk for a greater reward (a sky-high interest rate).

    Alt-A Mortgage Lenders

    Alt-A mortgage lenders typically offer mortgages to borrowers with limited documentation, limited or no down payment. and/or credit scores mostly between 620-720. This type of mortgage lender falls somewhere between a prime lender and a subprime lender. Borrowers may use an Alt-A mortgage lender because they have a tricky loan scenario or a sticking point that makes it difficult or impossible to close with a traditional mortgage lender. The risk appetite of an Alt-A lender is medium-high.

    Mortgage brokers work independently with both banks/mortgage lenders and borrowers, and need to be licensed. Their job is to contact borrowers and bring in potential deals. Once they have a deal, they can send it to a mortgage bank or a wholesale lender. They need to process the loan once it is approved, and can negotiate pricing with the bank or mortgage lender to receive a rebate, known as a yield spread premium. Mortgage brokers may form partnerships with real estate agents to ensure a steady stream of new business.

    Loan officers work under mortgage brokers, and basically do the same thing a broker would do, except they don t need to be licensed. They solicit borrowers using direct mail, telemarketing, and similar practices. Brokers usually provide them with office supplies and leads, and each take a split of the total commission. They don t need any experience, so take caution if and when one solicits you.

    Related: Take a look at the top mortgage lenders in the second quarter of 2010.


    Welcome to the Federal Home Loan Bank of New York #2nd #mortgage #lenders


    #federal home loan bank

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    Throughout 2015, the Federal Home Loan Bank of New York demonstrated our ability to identify opportunities, overcome challenges and meet the needs of our members, resulting in another strong year for our cooperative. more

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    Participating members originating loans in high-cost areas find the MPF Program beneficial because pricing is the same as conventional conforming loans. more

    Our cooperative s strength enables us to provide quality credit products at flexible terms. more

    As long as markets remain open, and a member has pledged sufficient qualifying collateral and is willing to purchase the requisite amount of capital stock, the FHLBNY will always continue to lend to our members to help you meet your community s needs . more

    LATEST NEWS

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    A Wide Range of Products for Our Members. more

    New York, NY The Federal Home Loan Bank of New York ( FHLBNY ) today released its unaudited financial highlights for the quarter ended June 30, 2016. more

    Updates to the 2016 Fee Schedules. more

    Throughout 2015, the Federal Home Loan Bank of New York demonstrated our ability to identify opportunities, overcome challenges and meet the needs of our members, resulting in another strong year for our cooperative. Our continued success stems from the strength, stability and sustainability of our franchise . more

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    Comparison of a 30-Year vs #mortgage #calcualtor


    #15 year fixed mortgage rates

    #

    Comparison of a 30-Year vs. a 15-Year Mortgage

    A bewildering variety of mortgages is available, but for most homebuyers there is, in practice, only one.

    The 30-year-fixed mortgage is practically an American archetype, the apple pie of financial instruments. It is the path that generations of Americans have taken to first-time home ownership. According to the Mortgage Bankers Association, 86% of people applying for purchase mortgages in February 2015 opted for 30-year loans.

    But many of those buyers might have been better served if they had opted instead for a 15-year fixed-rate mortgage ; the 30-year’s younger, and less popular, sibling. The loans are structurally similar – the main difference is the term. (See also, A Guide to Buying a House in the U.S. )

    A shorter-term loan means a higher monthly payment, which makes the 15-year mortgage seem less affordable. But, in fact, the shorter term actually makes the loan cheaper on several fronts – over the full life of a loan, a 30-year-mortgage will end up costing more than double the 15-year option.

    How the Term Affects the Cost

    The main driver of higher costs is time. A mortgage is simply a particular kind of term loan – one secured by real property – and in a term loan, the borrower pays interest calculated on an annual basis against the outstanding balance of the loan. Both the interest rate and monthly payment are fixed.

    Because the monthly payment is fixed, the portion going to pay interest and the portion going to pay principal change over time. At the beginning, because the loan balance is so high, most of the payment is interest. But as the balances gets smaller, the interest share of the payment also declines, and the share going to principal increases. (For further explanations, see Investopedia’s tutorial Mortgage Basics .)

    In a 30-year-loan, of course, that balance shrinks much more slowly – effectively, you’re renting the same amount of money for more than twice as long. (It’s more than twice as long, rather than just twice as long, because in a 30-year mortgage, the principal balance does not decline at as fast a rate as in a 15-year loan.) When the interest rate is 4%, a borrower actually pays almost 2.2 times more interest to borrow the same amount of principal over 30 years compared to a 15-year loan.

    Differences in Interest Rates

    Moreover, because 15-year loans are less risky for banks than 30-year loans, and because it costs banks less to make shorter-term loans than longer-term loans, consumers pay a lower interest rate on a 15-year mortgage – anywhere from a quarter of a percent to a full percent (or point) less. And the government-supported agencies that finance most mortgages impose additional fees, called loan level price adjustments, which make 30-year mortgages more expensive.

    Fannie Mae and Freddie Mac charge price adjustments to borrowers who have lower credit scores or are putting down less money.

    “Some of the loan level price adjustments that exist on a 30-year do not exist on a 15-year,” says James Morin, senior vice president of retail lending at Norcom Mortgage in Avon, Conn. Most people, according to Morin, roll those fees into their mortgage for a higher rate rather than paying them outright.

    Imagine, then, a $300,000 loan, available at 4% for 30 years or at 3.25% for 15 years. The combined effect of the faster amortization and the lower interest rate means that borrowing the money for just 15 years would cost $79,441, compared to $215,609 over 30 years, or nearly two-thirds less.

    The rub, of course, is the monthly payment. The price for saving so much money over the long run is a much higher monthly outlay: The payment on our hypothetical 15-year loan is $2,108, or nearly 50% more than the monthly payment for the 30-year loan ($1,432).

    If You’re About to Retire

    If you can afford the higher payment, it is in your interest to go with the shorter loan, especially if you are approaching retirement when you will be dependent on a fixed income.

    For some experts, being able to afford the higher payment includes having a rainy day fund tucked away – according to Bob Walters, chief economist for Quicken Loans, your liquid savings should amount to at least a year’s worth of income. What financial planners like about the 15-year mortgage is that it is effectively “forced saving,” in the form of equity in an asset that normally appreciates. (Although like other equities, homes rise and fall in value.)

    Weighing College and Retirement Savings Goals

    There are some instances where a borrower may have incentives to save and invest that money elsewhere, as in a 529 account for college tuition or a 401(k) retirement account, where an employer matches the borrower’s contributions. And with mortgage rates so low, a borrower could, in theory, choose to borrow with a 30-year note, and invest the difference between that lower monthly payment and the higher amount he or she would have paid each month on the 15-year mortgage.

    For example, in the previous example a 15-year loan monthly payment was $2,108 and the 30-year loan monthly payment was $1,432. A borrower could invest the $676 difference elsewhere.

    The back-of-the-envelope calculation is how much (or whether) the return on the outside investment, less the capital gains tax you owe on it, exceeds the interest rate on the mortgage, after accounting for the mortgage interest deduction. (For someone in the 25% tax bracket, the deduction might reduce the effective mortgage interest rate from, say, 4% to 3%.)

    This gambit, however, demands a propensity for risk, according to Shashin Shah, a certified financial planner in Dallas, because the borrower will have to invest in volatile stocks.

    “Currently there’s no fixed-income investments that would yield a high enough return to make this work,” says Shah. It also requires the discipline to systematically invest the equivalent of those monthly differentials and the time to focus on the investments, which, says Shah, most people lack.

    (For more on the special considerations of getting a mortgage at various life stages, see Getting A Mortgage In Your 20s and Getting A Mortgage In Your 50s .)

    A Best-of-Both-Worlds Option?

    Most borrowers evidently also lack – or at least think they lack – the wherewithal to make the higher payments required by a 15-year mortgage. But there is a simple solution for 30-year borrowers to capture much of the savings of the shorter mortgage: Simply make the larger payments of a 15-year schedule on your 30-year mortgage, assuming the mortgage has no prepayment penalty.

    You are entitled to direct the extra payments to principal, and if you make the payments consistently, you will pay the mortgage off in 15 years. If times get tight, you can always fall back to the normal, lower payments of the 30-year schedule.

    The Bottom Line

    Many buyers would be well served if they opted for a 15-year fixed-rate mortgage instead of a 30-year mortgage. A lower interest rate and shorter term mean that you will pay considerably less for your loan.

    And as Shah says: “There’s not a single client that we have who’s paid off their house that has ever felt bad about it.” The rub is the higher monthly payment, and it is sensible to weigh the value of a less costly mortgage against other savings priorities like college, retirement and a rainy-day fund.

    (You may also be interested in reading 6 Tips To Get Approved For A Mortgage and Mortgages: How Much Can You Afford? )

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    A type of tax credit available to students of a post-secondary educational institution, such as a college or university.

    The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price.

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    Social finance typically refers to investments made in social enterprises including charitable organizations and some cooperatives.

    Smart beta defines a set of investment strategies that emphasize the use of alternative index construction rules to traditional.

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