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Types of Mortgages
There are many types of
mortgages available today. The most common types are discussed below:
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If you are not sure
what kind will best meet your needs, I can help clarify the advantages and disadvantages
of each and together we can ensure you select the right one. |
Fixed Rate: Also known as a Conventional Mortgage. The interest rate that
you pay on a fixed rate mortgage remains the same over the life of the loan, usually 15 or
30 years. Your monthly payment of interest and principal remains unchanged, even if
interest rates in the general market go higher.
Rates for 15-year fixed rate mortgages are often lower than for a 30-year mortgage. Equity
also builds at a faster rate than with the 30 year mortgage. Fifteen-year fixed rate
mortgages provide a significantly reduced amount of interest paid over the course of the
loan.
Adjustable Rate Mortgage (ARMs): Also known as a Variable Rate Mortgage.
While the loan is for a fixed (and usually long) term, the interest rate fluctuates over
time. The terms of the loan contain the formula used to determine the changing interest
rate and the interval at which the rate is allowed to change. This interval can be yearly,
or another stated interval such as every 3 or 5 years.
The interest rates of ARMs are generally lower than those of Fixed Rate Mortgages. This
means that borrowers can often qualify for a larger loan. If prevailing interest rates
fall, the interest rate of the ARM may also go down, thereby saving the borrower money.
Balloon Mortgages: Interest rates and monthly payments are calculated as though the
loan would be paid back over a 30 year period. However, the entire balance must be paid in
full in a lump sum at a specified date, often after only three to seven years. This kind
of mortgage is often used as a short term financing arrangement.
FHA and VA Mortgages: FHA (Federal Housing Administration) mortgages are available
to all citizens while a VA mortgage is for veterans only. The qualifying requirements for
FHA and VA mortgages are usually less stringent than banks, and these mortgages are often
guaranteed or insured by the Government.
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| There are a number of
costs associated with the sale of a home. Find out
what these costs are. |
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The Hollee Jo Vail
Advantage |
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