When opting for a mortgage loan, make sure you are not being pressured and you have fully realized your financial position. Once you have determined that, get to know what kinds of mortgage loans are available in the market. What will suit best for you. And what maximum benefits you can excavate out of them. Here are some advantages these five major types of mortgage loans can give you:
Fixed Rate Mortgage
A fixed loan rate remains unchanged throughout the life of mortgage. The payments you make remain the same every month. This helps in making you organize your budget accordingly, giving you less worries. This loan is the safest kind of mortgage loans. A fixed rate loan involves the following:
o 30 Year Fixed Rate Mortgages (360 Installments)
o 15 Year Fixed Rate Mortgages (180 Installments)
o Biweekly Mortgages
o Convertible Mortgages
The traditional fixed loan rate may still be the best mortgage for your situation. One benefit of fixed loans is that you have to pay lower monthly payments, while providing for an unchanging monthly payment schedule. Many lenders may also offer 25, 20, to about 40 year term mortgages. But this can end you up paying more interest rate than usual.
Adjustable Rate Mortgages
As the name tells, these loans are quite flexible in nature and adjust to the latest market trends. The best thing about such loans is that they are bendable to your situation. You can select the mortgage loan you require when interest rates are quite low and get it adjusted throughout the loan term.
ARM’s have interest rates that change according to financial indexes determined by the current market. This indicates your payments can rise or fall depending change in index. This may often lead to unsteady payments so the home buyer must be prepared in advance. If your financial situation forces you to choose this kind of loan, you don’t have to worry, you can always re-settle the terms or refinance later to get a much better deal.
Preference towards FHA (Federal Housing Administration) loans is increasing day by day. The reason is that they secure and reliable, both in terms of borrower as well as the lender. These loans are insured by the US Government, therefore borrowers find it convenient than other conventional loans, and for lenders it reduces borrower’s risk of default payments.
If you are looking to purchase home with the lowest possible down payment, or your credit is not perfect, or you want to refinance your current mortgage – FHA loans will be a sensible option to make. FHA Loans have:
o Low down payments
o Low closing costs
o Low mortgage insurance
o No credit score requirements
o Easy terms and conditions
A VA (Veterans Administration) loan provides low-cost insured home mortgage loans. Whether you’re buying a home or want or refinance your mortgage, a VA mortgage loan might help. However, to qualify for a VA loan, you must be a veteran, military-related individual or their spouse. VA mortgage loans offer many benefits and protections that other loans don’t, including:
o Credit Flexibility
o Great Interest Rates
o No Down Payment
o No Mortgage Insurance
o Low closing costs
A reverse mortgage is a loan made to older Americans who want to obtain equity from their homes in the form of cash. These loans are basically intended for retired people who may need the money to enhance retirement pensions, Social Security, or for medical purposes.
The advantage of such a loan is that of receiving a monthly tax-free income that is available for life or until the house is sold and the homeowner moves. The program of payments depends on the value of the home and the ages of the owners.