Frequently Asked Questions – Mortgages

Are there special mortgage plans for first-time homebuyers?

Yes. When you finance the purchase of your home or refinance your current loan on your home with a Gibraltar Bank First Mortgage Loan, your loan application fee will be refunded at closing.

What is the difference between a fixed-rate mortgage and an adjustable- rate mortgage (ARM)?

A fixed-rate mortgage is a home loan with steady mortgage interest rates and monthly payments that do not change throughout the life of the loan. An adjustable-rate mortgage is a mortgage loan whose interest rate is periodically adjusted based on an index. The monthly payments made may change during the term of your mortgage loan with the changing interest rate.

Can I pay off my loan ahead of schedule?

Yes. By sending in extra money each month or making an additional payment at the end of the year, you can accelerate the process of paying off the loan. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal. Most lenders allow loan prepayment. Depending on the type of loan you have, you may have to pay a small prepayment penalty to do so.

How large of a down payment do I need?

There are mortgage options now available that only require a down payment of 5% or less of the purchase price. But the larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a private mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that you'll also need money for closing costs, moving expenses, and possibly repairs and decorating.

What happens if interest rates decrease and I have a fixed-rate loan?

If interest rates drop significantly, you may want to refinance. Most experts agree that if you plan to be in your house for at least 18 months and you can get a rate 2% less than your current one, refinancing is smart. Refinancing may, however, involve paying many of the same fees paid at the original closing, plus origination and application fees.

What are discount points?

Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (.125) or ¼ (.25) of a percentage point. When shopping for loans, ask lenders for an interest rate with 0 points and then see how much the rate decreases with each point paid. Discount points are smart if you plan to stay in a home for some time since they can lower the monthly loan payment. Points are tax deductible when you purchase a home and you may be able to negotiate for the seller to pay for some of them.