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| What Kinds of Mortgages Are Available? |
| Fixed Rate Mortgage: Interest Rates and monthly payments remain unchanged for a loan. |
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| Adjustable-Rate Mortgage: Interest rates and monthly payments can go up or down on the market. |
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| Balloon Mortgage: Mortgages that have a fixed rate and based on a 30 year mortgage payment. However, they have a term that is generally 5, 10, or 15 years. This means that at the end of your term, you will have an outstanding balance that is payable on demand at the end of the term. |
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| Hybrid Loans: A combination of fixed and adjustable mortgages. |
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| How do you decide which loan is the best depends on the Question: |
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How much cash do you have for a down payment?
What can you afford in monthly payments?
How might your financial situation change in the near future and beyond?
How long do you intend to keep this house?
How comfortable would you be with the possibility of your monthly payments increasing?
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| What is a Fixed Rate Mortgage? |
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A Fixed rate mortgage is when your interest rate and monthly payments will remain the same for the entire life of your loan. Fixed rate mortgages
are offered in a variety of terms: 30 and 15 years being the most common. The 15 year term usually has an interest rate of about 1/2 point lower
than the 30 year term. There are also a few variations of the traditional fixed rate mortgage such as a graduated payment mortgage. Graduated
payment loans allow you to pay less at the beginning of the loan and then increase your payments as the loan matures.
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| What is an Adjustable Rate Mortgage? |
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Adjustable rate mortgages (ARM) are another common type of mortgage. These types of mortgages start at a low interest rate and then adjust based
on a selected index. There are many different types of economic indicators that can be used as an index: 6 Month treasury, 3yr treasury, 5yr
treasury, COFI, FHLBB, or LIBOR. Adjustable rate mortgages offer a variety of repayment terms: 10/1, 7/1, 7/23, 5/25, and 5/5. A 10/1 year adjustable
rate mortgage will have the same interest and monthly payment for the first 10 years. At the beginning of the 11th year, interest rate will be
adjusted each year and the payment will change accordingly. Be sure to check with your mortgage broker or banker to find out the yearly and lifetime
cap of your ARM. There will be a maximum amount the rate can go up per year, and there will be a maximum amount the rate can go up for the life of
the loan.
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| How to Save Money Refinancing: |
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Research all costs and fees.
Don't be afraid to negotiate with your lender.
Shop around for the lowest rates.
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