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Types of Mortgages
There are two
types of mortgage programs conventional and government. All
mortgages can either have fixed mortgage rates or variable
mortgage rates.
You can look out
for various government programs available for consumers today
including FHA (HUD), VA, and RHS. Additionally there are state and
local housing programs that vary by locale.
Conventional
loans are either fixed or variable mortgage rates.
In case you are interested in conventional loans, as mentioned
earlier, you have two choices namely fixed mortgage rates & variable
mortgage rates.
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Fixed Mortgage
Rates:
Today fixed mortgage rates are available with 15, 20, 25, 30, 40 &
even 50 year terms. The amount of interest is directly proportional
to the term you choose. The longer the term the more interest you
will pay; the shorter the term of the loan the lower the mortgage
rate will be. For instance, with a 15-year term your mortgage rate
might drop as lower as half than a 30-year term. Over the course of
the loan this will save you enormous amounts of money. The payments
on a monthly basis will be higher with a shorter-term loan however.
A bi-weekly mortgage allows the borrower to make payments every two
weeks. This amounts to an extra monthly payment every year and
believe it or not will shorten a 30 year mortgage down to 18 or 19
years a thus saving tons of money in interest.
·
Variable
Mortgage Rates:
As the name implies have varying interest rates depending on the
type of product and there are a wide variety. Some of them are;
negatively amortizing loans, two step mortgage, convertible ARM,
lender buy down, fixed period ARM's, and Graduated Payment
Mortgages.
Other types of
loans are Interest only loans with a balloon payment, reverse
mortgages, and Jumbo loans.
With so many programs to choose from it is important to find the one
that is best suited for your needs. The major determining factors
are how much of a monthly payment you can afford (not to be confused
with how much you qualify for) and how long you plan on staying in
your house. There are pros and cons with each program. There is
bound to be one that suits your situation better than the others.
Points to be
considered are:
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The amount of money you can easily afford to pay towards the monthly
installment.
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Do
not aim to borrow all the money you qualify for & concentrate on the
amount you can easily pay back.
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How long you plan on staying in your house?
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