At Merchant of Homes, we are dedicated to ensuring that you understand the ins and out of purchasing a property.  This helps you find the best property for you at a price you can afford.

When you find a property that you’re interested in, you know that you’ll most likely be taking out a mortgage loan to help pay for it.  When you apply and agree to its terms, your mortgage payment will be broken down into four parts:interest rates

  • Principal
  • Interest
  • Taxes
  • Insurance

When it comes to mortgage interest, this number will be represented as an annual percentage rate (APR).  But what determines this rate and how does it work?

Was Your Loan Fixed Or Variable?

How much you pay in mortgage interest is determined by several factors, including the interest rate at time of purchase, your loan amount, and how much you put down.  It also depends on if the loan you took out was fixed or variable.

If your loan was fixed-rate, you will expect the same mortgage interest rate month after month.  This makes it easy for homeowners to budget and predict their payments.  On the other hand, while not as common, variable-rate mortgages will change based on current interest rates.

Many lenders offer rate lock programs, which allow you to lock in a favorable interest rate for up to 90 days, even if rates go up.  This allows you to shop for a home with favorable terms.

Remember To Claim Mortgage Interest On Your Taxes

While it can be a pain to pay interest on a mortgage loan, know that it can benefit you come tax time! Remember to include your mortgage interest payments on your federal taxes and you can see a reimbursement. According to the IRS:

You can deduct home mortgage interest on the first $750,000 ($375,000 if married filing separately) of indebtedness.  However, higher limitations ($1 million {$500,000 if married filing separately}) apply if you are deducting mortgage interest from indebtedness incurred before December 16, 2017.”

You can then use this extra cash to save or use at your discretion.  If you qualify, you may also be able to take advantage of mortgage interest credit.  This program is designed to help lower- to moderate-income earners make their monthly payments more affordable for as long as they own the home.

As always, before applying for any mortgage loan, work closely with your lender to find the best option for you.

Need Help Purchasing A Property?

Trust The Experts At The Eric Merchant Team!