Some of the Available Loan Types -

Home
>
Mortgage Refinance
>
Some of the Available Loan Types

Some of the Available Loan Types

There are many mortgage products available on the market today. We can help you find out which one is right for you. Here are the most common options.

Fixed Rate Mortgages (FRM's)

* Interest rates stay constant for the life of the loan.

* Offered in 10, 15, 20, or 30 year terms.

* Payments are made up of principal and interest (P & I) portions and escrow portions. The P & I portion would not change for the life of the loan. Escrow amounts would pay for things like home owners insurance and property taxes. Escrow amounts may vary from time according to the cost of these items.

* If your loan requires that you carry Personal Mortgage Insurance (PMI), these payments would be added to your monthly payment amount until this mortgage would no longer be necessary. This is normally when you acquire 20% equity in the home.

* Fixed rate mortgages usually have low down payment requirements.

Adjustable Rate Mortgages (ARM's)

* Also called variable-rate loans.

* Starts out with a lower interest rate, and changes according to market fluctuations. How often it changes depends on the terms of the loan. The most common adjustment term is once every year.

* ARM's have limits, or caps, on the number of percentage points it can go up each year. It also has caps on how much it can go up for the life of the loan. This happens according to the terms of the loan you choose. For example- your mortgage starts at a rate of 4%. If you have a yearly cap of 2 points, and a life long cap of 6 points, this is what can happen to the percentage rate of your loan. At the end of one year your mortgage company can increase your rate by two points, to 6%. At the end of the second year, your mortgage company can increase your rate by 2 points, to 8%. (A total of 4 percentage points higher than the original term of the loan.) At the end of the third year, your mortgage company can increase your rate by 2 points, to 10%. A total of 6 percentage points higher than the original terms of the loan.) At this point you have had an increase of 6 percentage points and can no longer have your interest rate raised for the life of your loan. Of course these changes are tied to the index that your ARM is based on.

* A convertible ARM allows you to have the lower interest rates for the beginning of the loan, but the option to convert to a fixed rate loan when you choose. This usually requires a conversion fee as set up by your loan institution.

Balloon Mortgages

* These types of mortgages allow you to carry a lower interest rate than most other types of mortgages.

* Terms of these types of mortgages are usually for 5 to 7 years. At the end of this time period a payoff payment, or balloon payment, is required to pay off the remainder of the loan.

* If you plan on staying in the house at the end of your loan period, you must refinance your loan amount into a conventional mortgage plan to make your balloon payment. (A FRM or an ARM.)

Interest Only Mortgages

* An option that can be attached to any type of loan, not an actual loan type.

* You pay only the interest on your borrowed amount for the beginning terms of the loan. This is usually between 1 and 5 years in length.

* At the end of your interest- only period you begin making payments based on the interest rate of the type of mortgage you chose- a FRM or an ARM. You have conventional principal and interest payments, plus any escrow amounts due.

* You do not save any money on your principal when choosing this type of loan. It only delays you paying your principal for a preset length of time. Your P & I payments will actually be higher after your interest only period, because your payments will be amortized according to the remaining time left on the loan. Example- A 5 year interest only option on a 15 year mortgage for $100,000.00. You will pay only the interest for the first five years, then you will pay P & I for only 10 years. Therefore, you will be paying off the $100,000.00 over 10 years instead of 15 years, making your payments higher.

* This option works best for people in certain monetary situations. The most common ones are if you do not make a set amount of money every month, such as being paid on commission or bonuses. Another one would be if you are expecting a lump sum payment of money in the forseeable future. A more risky reason would be if you are sure you can invest the money saved by doing this for a secure profit at the end of your interest only period.

Jumbo Loans

* Most loan institutions follow the Fannie Mae or Freddie Mac federal guidelines for loans. They have an established maximum loan amount of $359,650.00. Any loan above this amount would be considered a Jumbo loan.

* Jumbo loans usually carry a higher interest rate.

Genesis Font is an SEO and Developer for Mortgage and Loan Officer Websites. We also offer Quality Web Hosting Services.

In The News:

Mortgage Refinancing Points to Consider
Corsavoo.com, France - 9 hours ago
Though it is probable to attain a no-cost refinance mortgage from a mortgage loan lender, remember that these lenders are out there, trying to earn a ...

Washington's Fannie And Freddie Plan: Why Now?
Forbes, NY - 15 hours ago
Any announcement would come just weeks before the two companies have to refinance $225 billion of mostly short-term notes. Fannie and Freddie sell debt to ...
Video: Obama Calls for Changes in Mortgage Giants AssociatedPress
US government to take over Fannie Mae, Freddie Mac Monsters and Critics.com
Government bail-out for US mortgage giants FannyMae and FreddyMac domain-B
Nolan Chart LLC - HULIQ (press release)all 2,117 news articles

Understanding Mortgage Refinance Rates
SheKnows.com, AZ - Sep 4, 2008
Mortgage refinance rates are the lowest rates, homeowners can get when trying to refinance their mortgages. Simple, isn’t it? Maybe so, but obtaining the ...

TopNews
Troubles spread to prime Md. mortgages
Baltimore Sun, United States - 21 hours ago
... interest-only mortgage with an adjustable rate. The rate kept rising until it was just too much, and he was told he couldn't refinance because the value ...
Report says 3.1 percent of Conn. mortgages overdue Newsday
Home loan troubles break records again The Associated Press
US Mortgage Foreclosures, Delinquencies Reach Highs (Update3) Bloomberg
Washington Timesall 678 news articles

Houston Chronicle
Baytown woman sues lenders, says she was a victim of predatory ...
Houston Chronicle, United States - Sep 4, 2008
Nanette Lewis refinanced her mortgage to get peace of mind. Instead, she says, she got a bait-and-switch, predatory loan and heartbreak. Now far less naive, ...

Outside brokers make calls for bank
Trading Markets (press release), CA - 11 hours ago
Wachovia's refinancing initiative comes as the bank is eliminating 5000 of 11500 jobs in its mortgage unit to cut costs. Insiders describe a difficult work ...

Bargaining for a better loan
Sarasota Herald-Tribune, FL - 23 hours ago
The potential bargaining power of borrowers is greatest on a refinance, because typically they have no time limit on when the money is needed. ...

Foreclosures, Overdue Mortgages Increase Again
Wall Street Journal - Sep 5, 2008
Lower prices, in turn, make it much harder for borrowers to refinance if they fall behind on their payments. The drop in values also means people have less ...

Mortgage Refinance Options to Think About
3x24 - Your Newspaper and News Magazine, Germany - Aug 26, 2008
Very few people in the world can afford to purchase a home in one payment so the world of mortgages and mortgage payments ‘came to be’. Mortgage refinance ...

What’s A Divorce Got to Do with Your Mortgage Refinance?
Corsavoo.com, France - Aug 25, 2008
When you’re the aggrieved partner, you silently wish that things will suddenly take a better turn, especially with an unpaid mortgage. Refinance plans have ...

mortgage refinance - Google News