A mortgage is a loan on a house or any property that has to be paid in pre-agreed time period. Or you can call it a 'lien'; a lien is the right to resell a property to claim losses due to non payment of loan. It is a sort of personal guarantee to the mortgage lenders or mortgage companies that you will repay the loan you have taken to acquire the property. Mortgages come in different packages with different mortgage rates and different tenure of repayment. Each has their own advantages and disadvantages. You should always choose the one that is tailor made for your needs, your future plans and your financial stability.
Every one dreams of having a house of their own and it is very exciting to see your dreams turn to reality. Buying a house is an expensive dream and you should tread with care over mortgage policies and mortgage quotes to grab the best deal.
You have chosen your dream house and the seller has finally agreed to sell his house. You visit several money lenders and finally you find someone who has approved your loan.
What next? What type of mortgage would you pick? It all depends on what plans you have for future and how much do you earn. What is your annual income obviously defines what your mortgage loan should be. Research well about the current mortgage rates that are available in the market theses days before you finally take a plunge. Surf the internet, read about mortgages.
Fixed Rate Mortgages is the most common mortgage option available. The mortgage loan has to be paid in fixed monthly payments of the principal amount and the interest over the agreed time period. The mortgage rates remain the same throughout the term as on the date the mortgage is issued. Chose the lowest Fixed rate Mortgage to save some money. The term of mortgage repayment can be chosen from 10 to 30 year fixed rate mortgage options. Fixed Rate Mortgage is ideal for people who plan to stay in their house for a long time.
Adjustable rate Mortgage popularly known as ARM is a mortgage loan whose interest rate fluctuates based on certain Indices. Some lenders would prefer using their own company costs to define the rates, rather than using standard indices. Adjustable Rate Mortgage ensures a steady repayment margin for the lender, who is indirectly related to the indices. In ARM the periodic payments that the lender make may change and in some cases even the term may change.
Interest Only Mortgage offers requires no payment of the principal amount during the initial days of the mortgage loan. The borrower has to pay only the interest only mortgage that might be applicable. The primary advantage of these loans is a low monthly mortgage payment which means a bigger mortgage loan. The period for Interest Only Mortgage ranges from 1 year to the half term.
Biweekly Mortgage means the borrower has to make mortgage payments once in a fortnight or twice a month. The amount to be paid is half of what you would have been your monthly mortgage payment. The borrower is required to make two extra payments annually. Choosing this option means you can clear up your principal mortgage amount sooner and save a significant amount in interest.
Two Step Mortgage features a 30 year mortgage rate with some add-ons. Your mortgage can be convertible or non-convertible. Popularly referred to as 5/25 and 7/23; 5/25 has a 5 year fixed mortgage interest rates for the initial years and then it steps over to a one year adjustable mortgage rate or a 25 years fixed mortgage rate. Similarly a 7/23 means the borrower has to make fixed interest rate mortgage payments and then the mode changes to a 23 year fixed mortgage rate or a 1 year Adjustable Rate Mortgage.
Federal Housing Authority or FHA mortgage is a mortgage insured by the U.S. Department of Housing and Urban Development, HUD's housing wing FHA. These mortgages have lower down payments and it is easier to qualify for these loans. FHA aims at making housing within everyone's means and thus invokes demand.
Veterans Affairs Loan is the mortgage option available only for the veterans and ex servicemen of USA. Veterans are guaranteed by the State and they can get a mortgage loan with negligible or no down payment. For those who joined before 1980 the eligibility is 180 days of active service and or those who joined after 1980 must have served for two years to be eligible for a VA loan.