Conventional Home Mortgage Loans
Adjustable Rate Home Mortgage Loans
These home mortgages, often referred to as ARM loans, fluctuate with the rise and fall of interest rates. There are no fixed rates to lock into, nothing saying that one monthís payment will be the same as the next. These types of home mortgage loans
are affected by the same interest rates that affect the economy and stock market; and depending on what the current market values are set at, you may not see the changes in your home mortgage for a while. When entering into an adjustable rate home mortgage
always read your contract and make sure you fully understand the fine print. Because adjustable rate mortgages fluctuate so much there are things called caps that are included in the contract, these are in place to limit the amount an interest rate or
payment can change during anyone adjustment period. The usually amount is 2%, but can vary depending on the type of cap. Initial caps limit the amount of interest rate change during a specified time period, and are not to exceed more than 2% in a year.
Subsequent caps refer the maximum amount of payment adjustments, which is limited to 7.5% annually; the last type of cap is the life cap and pertains the total interest rate adjustment that can happen over the life of the loan, which is limited to between
5% and 6%.
Adjustable Rate Hybrid Home Mortgage Loans
An adjustable rate hybrid mortgage is one that is often chosen by people who are sure that the investment they put into their home will make them money in the near future; it is also often the choice of people who are looking for only a short term deal.
The way it works is you are given a teaser interest rate, meaning a very low interest rate, but only for a short period of time, usually 2 to 7 years, after that period of time the interest rate is then reevaluated, your payments will then depend on what
ever the current interest rate is at the time of payment, making it more like a regular adjustable rate mortgage. An adjustable rate hybrid mortgage can also be initiated with a low fixed rate and then after a set amount of time that low fixed rate gets
raised to a much higher fixed rate, the only difference between this version and a common adjustable rate hybrid mortgage loan is that this type is that your payments will only change once during the life time of the loan, rather then changing every time
the interest rates change.
Adjustable rate hybrid home mortgage loans are best for people who are financially stable and are able to afford a sudden increase in their loan payments. So before deciding to sign onto an adjustable rate hybrid mortgage, make sure that you have some
sort of liquid capital available to you, so should you find that later on you cannot deal with the sudden change in the payments you can cover the increase.
Adjustable rate mortgages while easy to qualify for are not to be entered into lightly; they are risky and unstable and you have no control over the frequent fluctuation of interest rates. Make sure that before you sign on that dotted line that you
completely understand all that is entailed in an adjustable rate mortgage, you can easily go over your budget trying to make the payments required on an ever changing mortgage loan.
Balloon Home Mortgage Payment
This home mortgage loan starts out with you, the buyer, making a small down payment, your home mortgage loan then turns into a deal sort of like in a fixed rate mortgage loan, where you have a fixed interest rate and your payments donít change; while
with a balloon payment you do have a fixed interest rate so your payments donít change, you do however are within required to pay the balance that is left on your home in full after 3 to 7 years. A balloon payment home mortgage loan is easy to qualify
since there are no real credit requirements, this makes it very appealing to people with poor or no credit. The balloon payment home mortgage type gives those with poor or no credit 3 to 7 years to get their credit in order, so that later on they are able
to qualify for another type of home mortgage. The down side to a balloon payment mortgage is that once your balance is due, the only way to stay in your home is to either pay the balance in full or try and qualify for another home mortgage loan.
Bridge Home Mortgage Loan
If youíve found the perfect home for you and your family, but you havenít sold your old home first then this type of home mortgage loan is the one to look for; it helps you in purchasing a new home while you are waiting for the sale of your old
home. Your bank or mortgage company will set everything up so that the seller of the house you want to buy doesnít discount your bid just because you are trying to still sell your home. A lot of times a seller will not consider your bid if what you have
to offer for a down payment wonít be paid until you sell your home, sellers see you as a risky venture, if they enter into a contract with you then they have to wait for their money, when they could still be accepting offers from other people that can
get the down payment to them quicker. The bridge home mortgage loan eliminates this problem by letting you get the seller the money before the sale of your home, then when your home finally sells you take that money and pay off the bridge home mortgage
loan. The down side to this is if you donít sell your home then you have to deal with making two monthly home mortgage payments, the one on the house you are trying to sell and the one on the home that you just purchased. It is recommended that you only
enter this type of home mortgage loan if you have a lot of money that you can afford to be able to fund the later situation or are confidante that your home will sell quickly.
Fixed Rate Home Mortgage Loans
The most common type of home mortgage is called a Fixed Rate Mortgage; this has been around for years. A fixed rate mortgage guarantees you that whatever interest rate that your mortgage was locked into at the time of signing will stay the same for the
period of the loan. Fixed rate mortgages also usually last for 30 years, but can be as short or as long as 10 to 40 years. So if you were able to lock in a low interest rate and your loan term was for 30 years, it means that over those 30 years you would
continue to have that low interest rate, no matter what changes happen in the housing market. Using a fixed rate mortgage makes it easy to figure out what your final total will be when you are done paying off your home. The down side to this fixed rate
mortgage though is by the time you are done paying off your home, you will have paid more interest because of the higher number of payments.
A fixed rate home mortgage is ideal for a family that plans to stay in that home a long period of time. Many families that choose the fixed rate home mortgages when the housing market experienced a low interest rate are able enjoy the benefits of seeing
their home and property increase in value rather than those how did not get in on the lower interest rate and are now suffering because of the high interest rate and high taxes. A bad thing about fixed rate home mortgages is if the time that you are trying
to purchase your home is one where the housing market is experiencing high interest rates, and you later decide to sell, and the interest rates have dropped before you finish paying it off, you could have a hard time selling it. The high interest rate that
you are locked into when the interest rates drop also means that during that time you will pay much more than what your home is actually worth. Another bad thing about fixed rate home mortgages is if you do decide that you want to try and get a lower
interest rate, the only way to do that is to refinance. Fixed rate home mortgages are generally a good idea for people that want to stay in their home for a long period of time. The differences in the interest rates wonít create any financial instability
for these people; if you are sure that you want to stay in your home for the entire period of the loan, then you might want to look into another type of home mortgage, one that will give you greater flexibility should you choose to move before the end of
your mortgage period.
See also Government Home Mortgage Loans
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