Mortgage Terms Explained

If you are hunting for a mortgage, you will notice that there. Many different types of mortgages available I’ll mention some of the most commonly used and their uses.

15 vs 30 years

Your mortgage can be about anything you choose. 15 and 30 year term are very popular these days, although 10 and 20 years are available.

The shorter term, the higher the interest rate. But the main attraction of short-term mortgage is the money you save.

For example, on a $ 200,000 mortgage with a fixed rate of 4.5%, would you say $ 1013.38. Month for 30 years and pay $ 1529.99 per month for 15 years Over 30 years you would pay $ 364,816.80 compared to $ 275,398.20 over 15 years, a savings of $ 89,418.60, or 24.5% interest.

If you are a very conservative district cut a percentage reduction in the exposure of lenders to 15 years, your savings will be nearly 26%.

Adjustable rate mortgages (ARM)

ARM mortgages are adjusting their interest rates, in accordance with the contract you made with the lender.

Normally set interest for the first 1, 3, 5, 7 or 10 years. After this period is up, the interest can fluctuate within the limits of your contract with the lender.

The terms are usually 15 or 30 years (even if you negotiate almost any desired length). This may be a balloon to be involved.

Since the lender will not take a risk of losing money if interest rates rise, these loans have an initial rate of a fixed rate mortgage. The lowest rates are for 1 year ARM and will accordingly.

Many people take an arm, even in times of low prices, as now, as they are now more cheap and able to afford more house. However, the borrower is a risk that even afford the house after the prices are to rise freely.

There was a common time limit variations contracts 2% per year. However, 5% swings are the norm. Depending on what happens, interest rates, you may find themselves priced out of the house. Of course, if you can negotiate interest rates begin to return.

The average homeowner keeps his house for about 7 years. If you move before the first fixed term ARM is to plan until a good choice. If you plan more than 10 years, a fixed rate may be a better option.

Balloon Mortgage

A mortgage is a balloon that is not completely off, paid at the end of the term.

For example, you could get a fixed rate mortgage 15 years, you can use less of the amortization schedule would call normal pay. After 15 years, you still have a stake. How much depends on the conditions of the contract.

An interest only mortgage is an example of this type of loan. In the case of an interest free loan only, the ball is the total amount you originally borrowed.

This type of mortgage allows borrowers either pay more house then they could buy or its reduces their monthly expenses, so they spend or invest their savings elsewhere.

Even if you plan to move before the ball is due and your proceeds from the sale are sufficient to cover the ball, it might be a good idea. However, you have the very real possibility of having money when you sell the balloon, especially if you have to sell at a time of falling property prices.

Bi-weekly mortgage

A mortgage is a bimonthly where pay half the normal mortgage payments every two weeks. As you make 26 payments per year instead of 24, the wind make you pay interest sooner and saving considerable interest.

For example, a $ 200,000 mortgage at a fixed rate of 4.5% with a 30. The normal payment would be $ 1013.37 per month.

The bi-weekly $ 506.91. But success is enormous. Your loan will be repaid in 5 1/2 years, and you will save 28% or $ 32,639.75 interest.

You can create your own plan mortgage every two weeks with your current mortgage, assuming there is no prepayment penalty (which usually only for the first few years anyway). Simply send your bank or debit your checking account for half of your mortgage payment every two weeks. There should be no additional costs or fees to do so.

Or you can use a similar result for you. Your monthly payment by twelve and adding that to achieve your payment in this example, that would come to an additional $ 84.44 per month.

The secret is that any prepayment, no matter how small, will result in saving of interest and a shorter payment period.

Bridge Loans

Bridge loans in real estate transactions used to cover the down payment on a new home if the borrower has equity money in his old house, but not enough.

It is usually a loan of short-term interest will be refunded only if the owner sells his old house.

Conventional mortgage

Most mortgages are conventional, the terms vary only. A conventional mortgage to most people a mortgage is 15 or 30 year fixed rate 20% down.

Mortgages construction

These are really loans that carry a higher interest rate than a normal mortgage. They allow to borrow money to build a house and converted into a mortgage once the house is completed.

FHA (Federal Housing Administration)

FHA is a branch of Housing and Urban Development (HUD) Department. This is a time of great depression of creation, it is possible for people at home, at a time when banks granting mortgages where to buy.

FHA insured loans up to a certain amount which varies by region of the country and the type of loan. At present, the guarantees of approximately $ 160,000 for a home run, a little more than $ 300,000 for a house four families.

This type of mortgage is destined to become low and moderate income persons owners. It requires a low down payment requirements and flexible lending.

If the borrower for the government and paid by the warranty. This makes it easier for mortgage lenders would otherwise refuse to write.

Fixed rate

Fixed rate mortgage rates during the term of the mortgage, which can be set from 5 to 30 years.

Even if it may be of interest or a balloon, they are generally amortized conventional mortgage.

At times like now, when prices are low, most homeowners want to lock the low fixed prices. They are very popular, if prices fall, not as popular, if they are high or rising.

This mortgage type is a very good idea if you plan to live in your home for a while.

Line of credit home equity

A revolving line of credit secured by your home. Because it is a mortgage, it carries a lower price than other forms of credit is tax deductible.

It differs from a second mortgage, it is not. For a specific period or quantity and may in fact be retained as long as you own your home

This is most commonly used for debt consolidation and can be useful if you pull out your credit cards and use the money you save on interest to invest.

Interest only mortgages

This is exactly what it says. You only pay interest on capital is not reduced.

This is the grand daddy of all balloon mortgages and a greater risk that your home instead of Assesses vice versa.

It could very well come up with extra money at closing.

Payments are much lower than a normal amortized mortgage and if you have the discipline, it can be a helpful financial planning tool.

Jumbo Mortgages

Mortgages over $ 322,700 (the limit is raised regularly). Otherwise, the mortgage can be fixed or variable, balloon, etc.

Prices are generally a little higher than for smaller loans.

Doc No Doc Mortgages low

It is the mortgage application, the mortgage is not itself entrepreneurs living outside investments, salesmen and others whose income is variable mortgages can use low or limited documentation.

Very wealthy borrowers or those who want substantial financial privacy will sometimes no alternative doc.

In any case, despite its name, documentation is required. Lenders do not accept anything less than excellent credit rating and even then you will pay more for the privilege.

No Money Down Mortgage

These come in two flavors: FHA type loans, borrowers with low or moderate income, a home with little or nothing down and 80-20 plans, where wealthier borrowers with little money saved finances to buy 100% of the purchase price.

80-20 in the output plane of a first and second mortgage simultaneously. The borrower need to purchase mortgage insurance. Both loans are designed to provide at least 80% of borrowing costs plus insurance because they have no opposite.

If the borrower is the introduction of a little money, you will see the mortgage referred to as 80-10-10 (the last digit percentage of the deposit) or a similar number.

It is mainly due to borrowers who have not saved enough for a down payment or those who have money, but used for other purposes.

Refinancing

This means that it technically. A new mortgage with different conditions, hopefully better Many people use it interchangeably with obtaining a second mortgage or line of credit, in other words the development of the net their home.

Second mortgage

Secondary financing obtained by a borrower.

They can be set at the level or in the form of a line of credit, which is simply a revolving line of credit secured by a home.

Homeowners use these forms of financing to consolidate bills, make home renovations, put their children in school, etc. They are in the equity they have in their home to tap used for other things.

This is not necessarily a good idea. You must be firm control of your finances if you do this or do you risk losing your house or is to raise funds for the mortgage, sell when you pay.

If done correctly, you can repay your debt at a lower tax deductible and invest your savings.

VA (Veterans Administration) mortgage

The VA provides mortgage guarantees to active duty and veterans who meet certain conditions.

As for FHA loans, the government guarantee, it is easier for veterans to low and moderate income and active service personnel department to obtain mortgages.

VA guarantee is $ 89,912 today. It is triggered periodically.

125% mortgages

If you want to bet on rising property prices, some lenders to lend up to 125% of the value of your home. If you’re right, you’re okay. Otherwise prepared to have your checkbook available when you sell your home.

I’m sure there are funding opportunities. Other available that are not covered and I do not even know But most major types of financing are available here.