Mortgage Soup
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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
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. This type of loan
is 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 an adjustable rate. 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? This type of
home mortgage loan 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
loans and combinations of them is the key to
finding the mortgage loan
that is right for you.
This article is the property of
www.1st-in-homeloans.com, which has been
offering home mortgage services since 2002. To
find out more visit
www.1st-in-homeloans.com
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