When buying a home you will always want to look at your mortgage options and find the right one that works for you. A mortgage is a very long term loan, which is why you will want to seek out professional help to learn about different mortgage rates and the pros and cons to each. Nowland Mortgage with Chris Wisniewski will explain the different mortgage options and their various conditions.
Fixed Rate Mortgage
A fixed-rate mortgage is one of the most popular options and for good reason. Fixed-rate mortgages have a set monthly payment for the length of the loan. It helps provide more peace of mind to know your mortgage payment each month. This helps to properly budget. There are three fixed-rate mortgage loan terms: 30 year, 20 year and 15 year terms.
• 30 Year Mortgage – About 90% of home buyers typically have a 30 year mortgage as the monthly rates are more affordable.
• 20 Year Mortgage – A twenty year mortgage has slightly higher payments but often has less interest rates than a thirty year loan.
• 15 Year Mortgage – You will have a payment twice as high as that of a thirty year mortgage. However, you get to pay off the mortgage faster and have much lower interest rates.
Adjustable Rate Mortgage (ARM)
Adjustable rate mortgages are far less common in America, as in other countries. The adjustable rate mortgage interest amount can fluctuate and can change according to a number of different variables. Adjustable rate mortgages can result in low to super high monthly payments. However, this changes by the type of ARM loan you have.
• Variable Rate Mortgage – A Variable rate mortgage is an ARM where the rates will adjust throughout the term of the loan. Most adjustments occur due to a Third Party’s Index and/or the Lender Margin. However, variable rate mortgages adjust to a set schedule which is usually every six months or every year and there is a set cap on the interest amount.
• Hybrid ARMs – Hybrid Arms are much like the others but start with a fixed rate and adjust on scheduled dates typically every third, then fifth year and so on.
Balloon Mortgage
A Balloon mortgage is normally a short term loan averaging around ten years. A Balloon Mortgage has very low payments. In most cases you’re only paying the interest rate. Later as the mortgage reaches the end of its term, the full balance is due which can be a risky option for the borrower. Balloon mortgages are not common due to the risk.
Interest Only Mortgage
A balloon mortgage is a type of interest only mortgage. A borrower will have a very low monthly payment for a certain period of time. Again, often only the interest rate is payed until a certain time and then the borrower must begin paying the principal instead of the full amount like a balloon mortgage. Once enough of the principal has been paid, then a readjustment is applied and the borrower will begin making a fixed rate mortgage payment.
Loan Officer & Mortgage Broker in Novi, West Bloomfield, Brighton, Waterford, Livonia, Howell & Greater Milford, Michigan
There are many more mortgage options such as Reverse Mortgages which favor seniors, Combination Mortgages which can include insurance. There are Government Backed Mortgages that can cover federal housing, rural homes, and veterans or active duty based loans and more. If you’re looking into buying or even refinancing your home and want help finding the right mortgage for you, contact Nowland Mortgage with Chris Wisniewski today!
