How To Choose The Best Types Of Mortgage Loans
If you are looking to purchase a new home, there are many types of mortgage loans that you may be interested in which could serve this purpose Buying a property is a serious matter and it’s important to learn which one suits your needs best . .Fixed-Rate Mortgage . . .This is one of the most popular types of mortgage loans as about 70 percent of home purchasers choose this option As the name implies, the interest rate of this type of loan is a fixed rate at the inception date and applies for the life or tenor of the mortgage loan The obvious advantage of having a fixed rate allows home buyers to manage their expenses better since the monthly repayment of principal and interest is constant throughout the mortgage loan . .Adjustable Rate Mortgage (ARM) . .This is another popular type of loan with the interest rate fixed to an index This index is not fixed and it fluctuates with the market rates Whenever the market rate rises the loan repayment rate rises accordingly Similarly, when it reduces, you will also get the benefit of paying your payment at a lower rate To prevent too much fluctuation if and when the financial market behaves erratically, a cap will be placed on such mortgage loans so as to limit these abnormal rate variations . .In an extension of ARM loans there is another type of loan called flexible payment ARMs There is no cap placed on them but these loans’ interest rates vary monthly, allowing borrowers some flexibility The mortgage payments usually start low at the beginning but slowly rise to sometimes exceedingly high rates over a period It may be beneficial for homeowners who are just starting out in their careers and expect job stability in later years . .Balloon Mortgages . .Similar to the fixed rate mortgage loans, balloon mortgages have a fixed and structured repayment schedule The only difference between the two is that this type of loans follows a much shorter loan term usually in the time duration of five to seven years Once this period is completed it leaves with an outstanding balance of the loan called the balloon payment . .Interest-only-Mortgages . .Interest-only mortgages are types of mortgage loans that allow borrowers more flexibility on their repayment schedule They simply pay the loan interest for an agreed period of time without including the loan principal This means the homeowner gets to enjoy paying lower monthly payment over a short-term duration However once this interest-only time period is over, payments are expected to increase quite significantly as it now includes the principal sum of the mortgage loan . .As you can see, understanding what options you have on the various types of mortgage loans is important so that you can make a good decision After all it’s going to be a long-term commitment for you and doing some homework now helps to make owning your dream home hassle free .
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Adjustable vs Fixed Rate Mortgages
Adjustable vs Fixed Rate Mortgages Brought to you by http://www.wolverinefinance.com Mortgage rates can either be fixed for the duration of your loan or can be adjustable. An adjustable rate mortgage is a loan that is set up with an interest rate that changes based on pre-determined criteria, primarily tied to the federal interest rate. If the interest rates are up, then your interest rate on your loan will be higher, if the interest rates are low then the interest rate on your loan will go down.Adjustable rate mortgages (ARM’s) are generally fixed interest rates for a period of time and then become adjustable. Generally speaking, the introductory interest rate for an ARM loan will be lower than a fixed rate mortgage. This is done in order to lower initial payments and allow people to take out larger mortgages, or give them smaller payments for the introductory period. This is attractive to people who may know that their income will be increasing over that period of time.Whether or not to choose an ARM or a fixed rate mortgage has been debated for as long as there have been ARM’s. Though people feel strongly in both camps, simple mathematics can assist you in determining which mortgage is best for you and your personality. Your personality? Yes. Some people are not comfortable with any uncertainty in their lives. The idea of having an uncertain mortgage payment in the future may cause them more stress than the money they are saving is worth. Therefore, factor your own comfort level into the equation.Generally speaking, ARMs are 2, 3 or 5 years, though they can be longer or shorter. At the end of that period your interest rate will become variable unless you sell your home or refinance. If you think that the likelihood of your selling or refinancing within the period of the ARM is strong, than the lower interest rates of the ARM loan will be of great benefit to you. If you think it is unlikely that you will sell or refinance within that period, then you may not benefit from an ARM.Bob and Robyn are a young married couple just starting out. Bob is in advertising sales and Robyn is a teacher. Bob is fairly confident that his income will continue to increase over the next several years as he works his way up to becoming an account executive. Robyn’s income is more predictable and is on an upward trend. Being a young couple they do not have the finances for large mortgage payments.Bob and Robyn are presented with two mortgage proposals for their $150,000 mortgage. Proposal one is a 30-year fixed rate mortgage at 6% and the other is a 5-year ARM at an introductory rate of 5.25%. The fixed rate mortgage payments would be $899.33 per month, not including taxes. The ARM would have a 5-year period where payments would be $828.31 per month, not including taxes. Bob knows that even if he can afford the extra $70.00 per month for the fixed rate mortgage, that $70 per month may be better spent knocking down principle during the ARM period. He is further confident that as his salary increases, he is likely to upgrade his home within five years or refinance to make home improvements. Bob and Robyn took the ARM loan.John and Catrina are a married couple with three grown children. John has been employed at the same company for 18 years and Catrina has been with her company for 12 years. They have consistent and stable income. Neither John nor Catrina expect any substantial increases in their salaries. After their last child moved out of the home they decided to downsize and buy a smaller home. They have a substantial down payment and will only be taking a mortgage of $100,000 on their new home. John and Catrina are presented with the same loan options as Bob and Robyn were. John and Catrina, however, know that it is unlikely they will sell or refinance in the next five years. They are comfortable with the payment schedule and, therefore, prefer the certainty of the fixed rate mortgage.There are countless websites that offer mortgage calculators to determine your mortgage payment. For your convenience we offer one on our site. You can review the different payment schedules based on the interest rates quoted for the fixed-rate and the ARM. Once you know the different payment amounts you will be able to determine which loan makes the most sense for you and your unique circumstances.Your mortgage professional should also be able to assist you in reviewing the options and making the best decision for you. The more open and honest you are with your mortgage professional the more helpful they will be. It is only if they are armed with full and honest information that they will be able to make recommendations to you. About the Author: Max Hunter is the author of many credit related articles. If you are looking for help with Home Loans or any type of credit issue please visit us at http://www.wolverinefinance.com For Credit Repair Software, other products, ebooks & articles, visit http://www.globalbizwiz.com I own a mortgage company and want to keep people in the know! I also have a For Sale By Owner website where you can post your home for free. www.MyUglyYellowSign.com By the way…Keep your credit clean…You'll always pay more if your credit is poor!
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Let 2nd Mortgage Loans Solve All Your Cash Problems
For most people your home is the most valuable asset you own When you have a need for a loan, you can rely on this asset of yours to take up one The best way to do this is by taking up one of the most common types of mortgage loans called the 2nd mortgage loans . .As the name implies, a 2nd mortgage loan is just a loan in addition to your first or original home mortgage loan that you have taken up sometime ago . . .Here are some quick tips on what you should know if you are considering taking up such loans: . .Available Funds . .1 How much you can quality for your second mortgage loan depends on the amount of equity you have since paid on your home . .2 The combined total amount of the original and 2nd mortgage must not exceed the value of the home . .Cost of Funds . .3 Given that all the underwriting process has been completed for your original mortgage loan, the administration work here is much simpler for this loan The interest rate on such 2nd mortgage loans is expected to be slightly higher than those of first mortgages . .4 Interest paid on the loan is on most cases usually 100% tax deductible . .5 When taking up such a loan, if this amount is over 80% of the value of your home, it requires private mortgage insurance to be arranged by the borrower . .Lender’s Right . .6 The lender places a lien on your home for your 2nd mortgage loan . .For many years many people have always used their homes as collateral to obtain many different types of mortgage loans This type of mortgage loan is predominantly structured on a long term period like 20 years So over the years as the value of your property rose up, you do have an enormous potential to borrow a 2nd mortgage loan against this property to access the extra money that you need . .As it is, there are many advantageous for taking up such loans but on the same breath there is a need to do your homework to determine if your present financial appetite allows you this luxury When you do take up 2nd mortgage loans do make sure that you can support the monthly payments and take note that defaulting in payments have serious consequences including losing your home .
Source: www.rsstnx.com