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Mortgage Soup by J.Stewart
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Mortgage Soup
Looking for home mortgage loans can get confusing with the alphabet soup
of mortgage loans programs available today. Most of these programs are just variations of fixed rate and adjustable
rate mortgage loans. These loans can be structured to meet your
financial needs, and most are available in 15 or 30-year terms. Your
long-term plans play an important part in selecting the right type of
loan, use these general guidelines to help you as you shop for home mortgage
loans.
Fixed Rate Mortgage - If you’re going to be staying in your home for
at least 7 years, consider a fixed rate. This loan’s interest rate is fixed for the life of the loan or term – 15,
20 or 30 years. Usually the shorter the term, the lower the interest rate. This type of loan is amortized – both the
principle and the interest are paid off at the end of the loan term.
Adjustable Rate Mortgage - If your only planning on living in your home
for a short period of time you may want to consider an adjustable rate. Your interest rate can adjust – up or
down. The rate is tied to an index like treasury bills or prime rates.
The initial rate usually starts out low, but can adjust after a set period of time. If you choose this type
of loan and then decide to stay in your home, you may want to refinance after two years to avoid any upward rate
adjustments.
Combination Fixed and Adjustable - Going to be in your house for just a
few years? This type of home mortgage loan can start out as a fixed rate
for a set number of years, keeping
your rate and payments low, and then the loan adjusts. Like the
adjustable rate, the amount of the adjustment is tied to an index that
can go up or down. This loan is sometimes
called a two-step or convertible ARM. Just remember, these loans usually
go up after a set period of time, or if you have to convert after a few
years it can cost you money. Be sure you understand your loan and when
your payments could go up to avoid paying more than you have to.
Balloon - An interest only loan. You would only want to use this loan if
you were only staying for a short time in your home. Because you’re
only paying interest, and nothing towards the principle, you don’t
build any equity. At the end of the loan term, you have to pay the
balance off all at once, but few people ever keep these loans for the
entire term.
Having an understanding of these basic types of loans and combinations
of them is the key to finding the mortgage loan that is right for you.
About the Author
J.S.Stewart is the author of "Mortgage Soup." Visit his
site to shop for mortgage loans at
http://www.2applyforloan.com
Click
here for a low cost mortgage
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