A fixed-rate mortgage keeps the interest rate fixed throughout the loan term. This is the direct opposite of an adjustable-rate mortgage (ARM) that changes the interest rate regularly.

Global Mortgage Group offers various fixed mortgage loans ranging from 15 to 30 years. Regardless of the length, the rate in all of them remains the same for the entire period.

In the case of a fixed-rate mortgage, if you purchase a home with a 15-year loan and your monthly payment is set at $1,500 in a fixed interest rate, you will be paying exactly this amount throughout the entirety of the loan.

People with a budget who do not want to deal with the sudden surge in interest rates will find this mortgage type ideal for them. However, these borrowers will not be able to take advantage of a drop in the interest rate unless they choose to refinance to modify their terms. A fixed-rate mortgage is also a good option for people who intend to live in the same house for the rest of their life. By paying a small monthly amount, they can eventually own the house when the mortgage period is over.

Principal refers to the initial mortgage amount taken against the property you mortgaged. When you obtain a mortgage, it comes in two parts — principal and interest. The principal is the amount that you borrow from the lender, and the interest is a percentage of that principal amount charged by the lender as the cost of borrowing that money. When repaying, you have to pay both the principal and the interest.

For example: if you borrow $300,000 from a lender to buy a house, the principal of your loan is $300,000. At a 3% of annual interest rate, it will add $750 of interest balance per month to the principal balance. If you repay $10,000 as a monthly installment, the lender will cut off $750 as interest, and the rest $9,250 will pay off the principal balance. So, after one month, your loan principal will be $290,750. With each monthly installment, the principal balance will be reduced.

If you find it difficult to calculate the balance principal, interest percentage, and other fees, check the loan's monthly statement. Our lenders will provide you a breakdown of all the numbers. It will show how much of the monthly installment goes toward paying off the principal balance and interest.

A bigger loan comes with a bigger interest rate. One way to avoid paying extra money is to pay off the loan faster by making additional payments with every monthly installment. Doing so in the case of adjustable-rate mortgages will save you plenty of money.

With Global Mortgage Group, you can get anything between $150,000 and $5,000,000 and a choice from various paying off options.

A pre-approval denotes an official letter from the mortgage lender outlining the maximum mortgage amount they are willing to lend you. It's not a commitment but only a rough estimate of the loan that you may borrow from that organization, the possible interest rate, and the monthly installment figure.

You can get the pre-approval document by filling up a loan application. The lender will ask you to submit some paperwork, including pay stubs, credit check, bank account statements, tax returns, and W-2 statements. An officer will look into the information provided and give you a written statement detailing the mortgage amount you are qualified to borrow.

A pre-approval does not guarantee the approval of a loan. It just means that the lending company has looked into your assets and other aspects of finances and chalked out the sum of a loan against that credit history.

At Global Mortgage Group, we approve over 97% of all applications. Some of our loan programs don't even require verifying the applicant's income! Mortgage pre-approvals have an expiry duration, ranging between 30 and 90 days, depending on the lending company. Meaning, you will need to find a home and apply for the loan within that expiry window. Upon the pre-approval document's expiration, you will need to apply for a new one that may affect your credit score a bit.

A pre-approval solidifies your financial stability and seriousness to the house seller. You can stand ahead of other potential buyers in a competitive market. This will particularly help first-time homebuyers to convince the seller that they are ready to put in an offer. Some people confuse between pre-approval and prequalification. However, the latter does not have much credibility since it does not involve a thorough investigation into your incomes and credit score.

When you acquire a mortgage, the lender divides the repayment schedule into several monthly installments over a fixed period. Amortization is the process of spreading out the mortgage over multiple years and into a series of fixed payments. The total mortgage amount, including the principal balance and interest, is supposed to be paid off with the last installment.

As a borrower of an amortized mortgage, you need to repay a specified monthly amount that pays off a portion of both the principal and interest. After every installment, the total loan balance decreases and finally gets paid off with the last payment.

For example, if you obtain a $20,000 amortized mortgage for five years, the lender will divide it into 60 monthly installments, including the principal and the interest amounts. Presume you need to pay approximately $377 per month and respectively $294 and $83 go into squaring off the principal and interest. Then, it will be $295 and $82 respectively in the next month. Over the loan term, the amount of principal payment will increase, and the interest will decrease (although the monthly installment will be the same).

At Global Mortgage Group, you can enjoy an amortization period longer than the mortgage term in the case of commercial loans. For instance, if you take a loan for ten years, the amortization period could be 30 years meaning the monthly installment amount will be similar to a 30-year loan.

If you are to repay this amount over 120 months at $1,000 per installment, the rate will continue for 119 months. In the last month, you will pay the remaining balance ($81,000 in this case) by one balloon payment.

Amortization is available on fixed-rate mortgages and home equity, personal, and auto loans. You won't get this facility on credit cards and interest-only loans.

Escrow refers to a financial account in which the funds are managed by an intermediary like a law firm or dedicated escrow company on behalf of the two parties committed to a dealing or transaction.

The neutral third party won't release the funds until the deal is complete.

The use of escrow accounts is quite common in real estate dealings, but it's a valid means of keeping money on hold under a neutral party for any transaction.

During a home buying process, the first time you will need to use the escrow account is when making the earnest money deposit to reflect your intent of purchasing to the seller. You can get that money back if the appraisal returns the home's value lower than the sales price or the home inspection finds serious issues with the home.

If you purchase a home on loan, your mortgage lender will ask you to put some money into an escrow account for paying the homeowners' insurance premiums and property taxes. The provider uses money from this fund to pay tax bills and insurance premiums on behalf of the homeowner. It ensures that the bills are paid on time.

Every mortgage provider will do an escrow analysis each year because the rates of the insurance premium and property taxes are not fixed. This analysis ensures there are adequate funds in the account for paying these bills over the next year. The lender will send you a statement after each yearly review. There could be a shortage (not enough funds to cover the expenses) or overage (extra funds than necessary) in the account.

Setting up an escrow account is mandatory in any real estate transaction.

An appraisal is simply an 'official' assessment of a property value. It is an integral part of a home-buying process since the mortgage lender expects the correct valuation of the property you will be purchasing.

When you apply for a loan for buying a house, the mortgage lender will require a report from the appraiser about the market price or a possible selling price of that house. These will be ordered by Global Mortgage Group at the Processing Stage of your loan - on your behalf and will be the only time we will ask for any form of payment.

It's a rough estimate that the lender uses to determine the mortgage rate. The principal or loan amount will be lower than the appraised value of the property. Global Mortgage Group loans out 75% (for Foreign Nationals) to 90% (for U.S. citizens) of a home's appraisal value.

The appraisal must be done by a person or an organization with the required licenses in that jurisdiction.

A licensed professional appraiser will work without any bias and make sure that the estimation is fair. When the lender requests the appraisal during the mortgage approval process, it will be randomly selected from a panel of reputable companies to ensure an unbiased opinion.

So, what features of the house matter to the appraiser? Some people have the misconception that eye-catching decoration and luxurious furniture increases the price. In fact, these things add value during other steps of home buying and selling, not in the appraisal process.

A home's value will depend on its current condition, square footage, number of bedrooms, location, neighborhood, and a handful of other things. Appraisers will also note the views, which means overlooking a beach, lake, or the city. A property in a prime location or a prestigious neighborhood will qualify for a higher loan than those located in a less desirable area.

Normal appraisals range between $500-800 depending on State and location. If a lender requires a Rental Comparison, it may add $100-200 more.

In short, a CAP rate on a commercial property is simply a way for investors, lenders, and other real estate professionals to quickly see the strength of the subject property and the likely one year unleveraged (meaning the property is purchased with cash) return that the property may generate. Like any other investment, investors need a way to compare one property with another and have a way to measure which is the stronger (less risky) investment – or vice versa, if they are willing to take on more risk, for more potential return; the CAP rate is that measurement.

The lower the CAP rate, the stronger (and more expensive) the property is. In a major market, think San Francisco or LA, you can expect to see CAP rates in the 4%-5% range. CAP rates can be in the higher single digits in a tertiary market and increase into double digits. In the most basic terms, an investor looking at a building with a 4% CAP should expect that building to yield approximately 4% in one year. An 8% CAP will be a property with a higher risk profile, hence the higher potential return required by sponsors (8%).

The CAP rate is usually always published on real estate presentations or websites, though it can be easily calculated. Take the Net Operating Income (NOI) of the property and divide it by the current market value as per current market prevailing rates.

CAP rates should be used as a quick basis for measurement to compare properties but not fully base a decision on. The reason for this is that CAP rates fluctuate based on the calculated NOI of the property, which can change based on the year, location, expenses for the building, etc. The CAP rate can also be adjusted based on who the intended reader of the information is. In summary, the CAP rate should be used as a quick measurement of a properties’ strength. If the estimated returns fit your investment profile, you should dig deeper into the property's details.

A 1031 exchange is simply an exchange of one investment property for another, where the capital gains taxes on the property sold are deferred. The strategy is named after the section in the IRS tax code, section 1031. A 1031 Exchange is a very popular and commonly used strategy in buying and selling investment properties. Investors can defer the capital gains taxes to a future period where it may be more advantageous to pay them.

An investor considering using a 1031 Exchange should engage a 1031 Exchange agent and their CPA early in the process. There are very specific timelines and requirements that need to be met for the exchange to be successful. A miss on a timeline or property detail could void the exchange or result in a sponsor's tax event.

This article will touch briefly on two of the main requirements for a successful 1031 exchange: timeline and debt replacement.

There are two main periods in a 1031 Exchange. The first is the 45 day period where you must identify three potential properties to exchange for and notify your exchange intermediary of those properties. The intermediary will receive the cash from your property's sale and hold onto that cash throughout the exchange process. If the cash from the sale goes to the sponsor, the exchange is void.

The second timeline is within 180 days after the sale of your property, and you must close on purchasing one of the properties you had previously identified to your intermediary. It's important to note that both time periods run concurrently. If the sponsor takes the full 45 days to identify replacement properties, they will have fewer days to close on the property they ultimately choose.

Debt replacement is often an area where investors find themselves in a taxable event. If there is any mortgage debt on the property being sold, that debt needs to be "replaced" on the new property. If the debt is lower on the new property, the difference will be counted as cash to you and could be taxable. For example: if you sell a property with a $1M mortgage balance on it and only have a loan of $700k on your new property, the difference of $300k is considered cash to you and could be taxable.

This article intended to quickly highlight a few key parts of a 1031 Exchange. Any investors looking at utilizing this strategy should engage a qualified exchange agent and their CPA for further advice on the process.