August 23, 2014

Types of Mortgages

Finding a home mortgage can sometimes be a daunting task.

From choosing a lender to finding the right interest rates loan, mortgages will play an important role in your financial future. Whether you are pursuing a first time mortgage or looking to refinance or attain a second mortgage, there are many different types of mortgage loans. It is important to understand, at least, the basics of each type of mortgage loan. That way, the best type of loan may be associated with your current financial situation.

First Time Mortgage Loans

While the following types of loans aren’t necessarily limited to first time mortgages, the majority of first time homeowners take out one of the following mortgages. Basically, a lender will offer different variations of two types of loans: a fixed- rate loan and an adjustable-rate loan (ARM). A fixed-rate mortgage will set up an interest rate that will not change over time. If the home mortgage terms state a 30 year fixed-rate loan, you will have that same interest rate for that thirty years (unless you choose to refinance at some point during that period). An adjustable-rate mortgage usually starts with a lower than prime rate, which holds for a set period of time, and then fluctuates with the market. The mortgage terms would state a 30 year 5/1 ARM. This would mean that you have 30 years to pay back the loan. The first five years will have a non-changing rate. After the five years, the rate will be subject to change every subsequent year. For those who may not be able to afford a down payment, lenders also offer an 80/20 loan. Basically, you take out two loans: one for the down payment and one for the rest of the principal. The second loan covering the down payment usually carries a higher interest rate.

Refinancing Mortgage Loans

When looking at refinancing, there are several options that may meet your needs. While refinancing may just be a restructuring of your current mortgage, there are several loans that may help for investors and home improvements. Home equity loans are loans that borrow on the equity already built in your present home. There are two types: a closed home equity loan and a home equity line of credit (HELOC). The first is much like your first mortgage in which the money is given up front with a fixed or adjustable rate. A HELOC, however, opens up a revolving line of credit. It’s like a credit card but on a larger scale and without the compounding interest. HELOCs give the borrower the power to dictate his/her own cash flow. Home equity loans are popular because the interest accumulated is tax-deductible.

Other Types of Loans

While the previous sections outlined the most common types of loans, there are a few more that warrant attention: a graduated payment mortgage (GPM) and a balloon payment mortgage. These are a more lender specific type of loan. A GPM is usually for those who are anticipating a greater financial future. For instance, a recently graduated doctor who cannot afford the average monthly payment now but will in a few years would highly consider this type of loan. It is a fixed-rate loan that starts with lower monthly payments and then gradually increases over the course of a specified term. At the end of this term, the monthly payment is locked. A balloon payment mortgage does not fully amortize by the end of the mortgage term. As a result, it leaves a balance due at the end of maturity. Usually, these types of loans require a type of refinancing at the end of the term. When looking for the right loan, be sure that you can handle the monthly payments. With a GPM, some anticipate more than they can pay, while the collateral for a home equity loan is your home. Failure to meet the requirements may result in foreclosure. There are a plethora of loans available. Research and ask your lender which might be the best for your circumstance.

 

To find other info about Fort Benning Real Estate please us the following resources.   For Mortgages including VA loans including Pre-Qualifying for a Loan use these pages. We also have info on the different types of Mortgages.  If you are First time home buyer – want to search for homes or would like to check out our Fort Benning Home Listings please use these resources.  Maybe you just want to know more about the Fort Benning area.   If so go to our page titled Fort Benning Growth or Infantry Museum or Fort Benning Schools.   To help you get around better while in our area.  Use our map of or Fort Benning or the page with a map of Columbus GA.   To learn more about Donna and Wayne Long visit our profile page or check out our testimonials.  To keep up with current events on base – please keep and eye on our Fort Benning blog.