3 Mortgage Loan Options.
1. The first and most popular form of mortgage loan is the fixed mortgage loan:
30 year fixed rate: this loan is the most commonly used loan today as it offers the low monthly repayments and is the best option for home owners who want to stay in their house for a long time. Advantage you have more cash in your pocket each month. Disadvantage you pay more for the loan in the end compared to shorter loans.
15 year fixed rate: this loan allows you to pay your home off in 15 years, most likely before your children finish school or before your retirement. You save in the long run. Advantage you pay half the interest of a 30 year loan. Disadvantage you have to pay higher monthly repayments.
Biweekly loan: this loan is usually done on a 30 year fixed rate plan but by paying every fortnight you add in extra payments every year and usually have your loan paid off in about 23 years. This loan also builds your equity in your home a lot faster. Advantage you pay your home off faster and pay less interest. Disadvantage you have to pay every two weeks.
Adjustable rate mortgage or (ARM): this loan is great because it works on interest rates and they usually start off with a lower interest rate than a fixed rate home loan. This leaves you paying less each month but leaves you at risk of paying a higher interest if the rates go up. Advantage when your interest drops so does your repayment. Disadvantage if your interest rate rises so does your repayment.
2. Next of the mortgage loan options is the convertible loans:
Hybrid and convertible ARM: there are two types of loans with this one. One is an ARM that you can convert to a fixed rate or a fixed rate home loan that you can covert to an ARM. These options give you the flexibility to change your mortgage loan after a few years. Advantage having the ability to change between ARM and fixed rate. Disadvantage if interest rates are high you might not wish to convert.
Interest Only Loan: this loan is good for people who work on commission or get big bonuses so they only pay the interest on their loan and when they get their bulk income they can put it towards paying off the actual loan. Advantages you are able to get a bigger loan amount. Disadvantage you have to pay in lump sums and when only paying interest you arent paying any thing off on your house.
Balloon loan: this loan is a fixed rate loan with small monthly repayments that usually last about 7 years, at the end of that time you must pay the loan in one big lump sum or have the option to refinance. Advantage great for people who will want to sell their house before balloon payment is due and low interest rates. Disadvantage you have to pay lump sum at end of the loan or refinance at usually a higher interest rate.
Reserve mortgage loan: this loan is designed for equity rich seniors. It requires no monthly repayments. Advantage more money in your pocket. Disadvantage loan needs to pay if you sell your house and reduces equity for inheritors.
Buy down mortgage loan: there is two types of this loan, a temporary and permanent. They both work on points and lower interest rates. Advantage lower repayments. Disadvantage need to pay higher down payment to lower interest rates.
3. The third option for loans is the special mortgage:
FHA mortgage: for first home buyers, people with little down payment and credit problems. Advantage low down payment and repayments. Disadvantage cap on loan and limited mortgage options.
Veteran Affairs Loan: only for people and widowers of the armed forces. Advantage no down payment necessary. Disadvantage not available for everyone and usually takes longer.
As you can see there are many loans you can get when you want to purchase a home. The best way to find out which one will work best for you is to talk to a financial professional and they will go through them with you.
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