Mortgage Soup
Looking for home mortgage loans can get confusing with the alphabet soup of
mortgage loans programs available today. Most of these programs are just
variations of the fixed rate
and adjustable rate mortgage loans. These loans can be structured to meet
your financial needs, and most are available in 15 or 30-year terms. Your
long-term plans play an important part in selecting the right type of loan,
use these general guidelines to help you as you shop for home mortgage
loans.
Fixed Rate Mortgage - If you're going to be staying in your home for
at least 7 years, consider a fixed rate. This loan's interest rate is fixed
for the life of the loan or
term - 15, 20 or 30 years. Usually the shorter the term, the lower the
interest rate. These types of mortgage loans are amortized - both the
principle and the interest are paid off at the end of the loan term.
Adjustable Rate Mortgage - If your only planning on living in your
home for a short period of time you may want to consider adjustable rate home
mortgage loans. Your interest rate can adjust - up or down. The rate is tied
to an index like treasury bills or prime rates. The initial rate usually
starts out low, but can adjust after a set period of time. If you choose this
type of loan and then decide to stay in your home, you may want to refinance
after two years to avoid any upward rate adjustments.
Combination Fixed and Adjustable - Going to be in your house for just
a few years? These types of home mortgage loans can start out as a fixed rate
for a set number of years, keeping your rate and payments low, and then the
loan adjusts. Like the adjustable rate, the amount of the adjustment is tied
to an index that can go up or down. This loan is sometimes called a two-step
or convertible ARM. Just remember, these loans usually go up after a set
period of time, or if you have to convert after a few years it can cost you
money. Be sure you understand your loan and when your payments could go up to
avoid paying more than you have to.
Balloon - An interest only loan. You would only want to use this loan
if you were only staying for a short time in your home. Because you're only
paying interest, and nothing towards the principle, you don't build any
equity. At the end of the loan term, you have to pay the balance off all at
once, but few people ever keep these loans for the entire term.
Having an understanding of these basic types of home mortgage loans and all
of their combinations of them is the key to finding the mortgage loan that is
right for you.
Home mortgage refinancing
Discover how you can save on home mortgage
Refinance, apply for online home equity loans or home loans for bad
credit
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