3 Mortgage Loan Options

When it comes to home loans there are plenty of options to choose from and it can be hard to determine which one can be right for you. Let’s have a look at the three main types of mortgage loans there are available and what they have to offer to help find one that will suit your needs.

1. The first and most popular form of mortgage loan is the fixed mortgage loan:

30 year fixed rate: this loan is the most commonly used loan today as it offers the low monthly repayments and is the best option for home owners who want to stay in their house for a long time. Advantage – you have more cash in your pocket each month. Disadvantage – you pay more for the loan in the end compared to shorter loans.

15 year fixed rate: this loan allows you to pay your home off in 15 years, most likely before your children finish school or before your retirement. You save in the long run. Advantage – you pay half the interest of a 30 year loan. Disadvantage – you have to pay higher monthly repayments.

Biweekly loan: this loan is usually done on a 30 year fixed rate plan but by paying every fortnight you add in extra payments every year and usually have your loan paid off in about 23 years. This loan also builds your equity in your home a lot faster. Advantage – you pay your home off faster and pay less interest. Disadvantage – you have to pay every two weeks.

Adjustable rate mortgage or (ARM): this loan is great because it works on interest rates and they usually start off with a lower interest rate than a fixed rate home loan. This leaves you paying less each month but leaves you at risk of paying a higher interest if the rates go up.

Advantage – when your interest drops so does your repayment. Disadvantage – if your interest rate rises so does your repayment.

2. Next of the mortgage loan options is the convertible loans:

Hybrid and convertible ARM: there are two types of loans with this one. One is an ARM that you can convert to a fixed rate or a fixed rate home loan that you can covert to an ARM. These options give you the flexibility to change your mortgage loan after a few years. Advantage – having the ability to change between ARM and fixed rate. Disadvantage – if interest rates are high you might not wish to convert.

Interest Only Loan: this loan is good for people who work on commission or get big bonuses so they only pay the interest on their loan and when they get their bulk income they can put it towards paying off the actual loan. Advantages – you are able to get a bigger loan amount. Disadvantage – you have to pay in lump sums and when only paying interest you aren’t paying any thing off on your house.

Balloon loan: this loan is a fixed rate loan with small monthly repayments that usually last about 7 years, at the end of that time you must pay the loan in one big lump sum or have the option to refinance. Advantage – great for people who will want to sell their house before balloon payment is due and low interest rates. Disadvantage – you have to pay lump sum at end of the loan or refinance at usually a higher interest rate.

Reserve mortgage loan: this loan is designed for equity rich seniors. It requires no monthly repayments. Advantage – more money in your pocket. Disadvantage – loan needs to pay if you sell your house and reduces equity for inheritors.

Buy down mortgage loan: there is two types of this loan, a temporary and permanent. They both work on points and lower interest rates. Advantage – lower repayments. Disadvantage – need to pay higher down payment to lower interest rates.

3. The third option for loans is the special mortgage:

FHA mortgage: for first home buyers, people with little down payment and credit problems. Advantage – low down payment and repayments. Disadvantage – cap on loan and limited mortgage options.

Veteran Affairs Loan: only for people and widowers of the armed forces. Advantage – no down payment necessary. Disadvantage – not available for everyone and usually takes longer.

As you can see there are many loans you can get when you want to purchase a home. The best way to find out which one will work best for you is to talk to a financial professional and they will go through them with you.

The world of mortgages can be very overwhelming when you first look at all of the options. There are so many terms, regulations, different fees, options, and different forms that it can become very confusing. But with a little understanding and research on exactly what mortgages are all about, you will find that it will be a lot easier to apply and get the home of your dreams. Below is some information on mortgages and some of the things that go along with them, like fees and terms, to help give you a little understanding on the subject.

Types of mortgages:

There are many types of mortgage options available. The three main types are fixed rate, convertible and special loans.

The fixed rate home loan in which you have options like:

30year loan – where you pay a fixed fee over the course of 30 years.

15 year loan – where you pay a fixed fee over the course of 15 years

Biweekly – where you pay your repayments every two weeks.

Adjustable rate mortgage or ARM – where you pay you variable amounts each repayment, they are based on the interest rate.

Convertible loans that include:

Hybrid and convertible ARM – where you can covert between a fixed rate or an ARM

Interest only loans – where you only pay the interest each payment until you are able to put down a lump sum.

Balloon loans – where you pay only the interest and at the end of the term you pay the total amount due all in one large payment.

Reverse mortgage – for equity rich seniors and don’t have to make any repayments until sale of the house.

Buy down loan – a loan that works on points to lower interest rates.

And the last category of loans is special loans:

FHA loan – for first home buyers and people with credit problems.

Veteran Affairs mortgage loan – only for people and widowers of the armed forces.

With all these mortgage options and more there will definitely be one that will suit your needs.

Fees:

There are many types of fees when it comes to mortgages, some of these fees and what they are for include:

Appraisal – where you pay for a person to do an appraisal on what your completed home’s value will be.

Organization – a fee that pays the lender and their workers for processing your application and other related duties.

Down payment – what you put down on a deposit on your home, this is usually about 1–20%

Closing costs – this pays for the transfer of your ownership of the home, this is usually 1-3% of your loans total but it can vary.

Other terms:

There are many other terms that you should know when going into the mortgage field. Below are some of them and what they mean.

Points – these are used to lower your interest rate and are usually done by a lump sum payment at the closing.

Good faith estimate – this is when you are given that total in amount of fees you will have to pay when it comes to the closing.

Loan locks – this is where you and the mortgage company or lender agree on a set interest rate at the beginning of the mortgage process, if you don’t lock your loan the interest rate can increase or decrease.

A truth in lending disclosure – this form gives you the complete cost of your loan in both a percentage and dollar form.

Pre qualifying – this is where you qualify for a loan before you actually go for one, it is a good way to review your financial status and lets you determine what amount of loan will suit your budget.

PITI – this means principle (amount of your loan), interest, taxes and insurance, all of these things are crucial to your mortgage and your repayments.

Escrow – this is where money and important information is held by a third party while two people are in a business transaction.

There is so much information you need to take in when you go into the world of mortgages but hopefully the above has given you a little bit of understanding of what it is all about. This should help you ease into the mortgage field a little easier. A financial professional or your lender will be happy to go through all the details with you when you are having trouble.

Amortization is a term that you don’t hear all that often but it is something we have all done at one point of a lives or another. In fact many people are doing it right now. Amortization is when you periodically pay off a loan. This could be anything from a car, goods or furniture. Paying a mortgage on your own home is a form of amortization and interestingly enough they both have ‘mort’ within them (a‘mort’ization and ‘mort’gage) which means to kill – which fits perfectly for these terms as it is exactly what you are doing. You are paying off your loan until it has been eliminated – killed, dead, no more or however else you want to put it.

The process of amortization is an easy one to understand once you know the basics and get the idea of how it all works. It is the process of paying off your loan through a set number of periodical payments. A typical payment is calculated by the whole of your loan or principle, the amount of months/payments you have to pay it back and the interest rate.

So for example if you bought a home worth $150,000 and you put down $20,000 deposit you are left with your principle of $130,000. You will need to get a loan for this amount and pay this bacl monthly over 30 years with the interest rate of 7%

So you would work out your monthly payments like this:

Divide your principle (the amount of your loan) which is $130,000 with how long you have to pay it off. In this case it would be 30 years or 360 months, and then you add your interest of 7% to your monthly payments. This ends up to be around $865.00. This would be your monthly payments.

Another thing you should know with amortization loans is that you pay off the interest first then whatever is left comes off your principle loan. But understand, this isn’t an interest only loan, as you do pay off parts of your principle in the same payment. For instance with your first repayment of $865.00, approximately $758.00 of that will be interest and $107.00 will be coming off your loan amount. This will take your loan to $129,893.00, but as your loan payments go on your amount of interest in each payment will go down. The amount you are paying off of the actual principle will go up. For another example your two hundredth payments will be like this, your interest out of the $865.00 will be about $526.00 and the amount coming off of your actual loan will be $339.00. This will bring your loan down to $89,806.00. Can you see the difference from your first repayment?

As you continue to pay your repayments, your principle amount will be outweighing the interest amount to look something like this: When you make that 300th payment of $865.00, the interest amount will be $258.00 and the amount coming off your loan will be $607.00 taking the total of your loan to $43,682.00. With your second to last payment your interest amount out of the monthly repayment will have dramatically dropped to $10.00 while your principle payment would have risen to $855.00

As you can quite clearly see the significance of each payment greatly changes as you get further and further on in your repayments. You start out paying mostly interest and in the end the majority of the monthly payment goes toward cutting down your initial loan amount.

Amortization is a delicate process of numbers which would take quite some time to figure out on your own so luckily there are many amortization calculators free to use on the internet. Use these to help you work out your monthly cost on a loan before you decide that this type of loan is for you. This will help you to know if it will fit into your budget smoothly or not. When going for loans many times there will be an accountant who will work all of these figures out precisely for you and some even give you a table so you know exactly where your money is going each month and whether it is off of interest or your actual loan.

6 Common Mortgage Scams

Scams are abundant in the world today and seem to be seeping into every facet of business, and mortgage loans are no exception. Most scams in the mortgage field tend to prey home buyers and owners who aren’t overly educated in the area. So here we will have a look at how some of these mortgage scams work and their outcomes so you know to be aware of them and do not fall into their trap.

Internet and Phone Scams:

These scams are usually by advertising low interest mortgage loan rates in the news paper or on the internet and even sometimes under a trusted company names. The way this works is by having people who are seeking a mortgage loan replying to an ad, either by phone or by internet forms. They then ask for your personal information like your account numbers and your social security number. These loans are instantly approved and the borrower usually goes on to faxing documents and sending wire transfer payments without ever meeting the lender in person. Usually the result of these scams is that you lose your money, have no loan and your personal information is either sold or your identity is then stolen.

Refinancing Loans Scams:

There are quite a few refinancing loan scams out there, many times these are focused toward the borrower who is in need of money. Usually you are left in greater debt and even have the possibility of losing your home. Some of these types of scams are:

Equity Stripping Scams

These scams usually arise when your mortgage lender approaches you and tries talking you into taking out a loan, because you need the money. They usually know that you can not afford the repayments but will encourage you to do so anyway, even if it means dodging up some of the loans forms so it will get approved. The reason they do this ‘encouraging’ while knowing you can not afford it, is to foreclose on your house as soon as you miss a payment.

Loan Flipping Scams

These scams are usually done after you have been paying your mortgage off for a while and the loan lender approaches you to refinance your loan, telling you that you can have a little bit of extra cash in your pocket. Once you have accepted, a few months later the lender will approach you again, this time offering another refinancing deal so you can get even more cash. This may sound good at first, but in the end you are paying more for your loan, are getting charged extra fees, points and even a prepayment penalty as well as a higher interest rate. Usually the more times you are talked into refinancing, the more you’re getting in over your head in the payments and the closer the possibility will be of losing your home.

Balloon Payment Scam

This scam is usually done when you no longer can keep up with the payments on your mortgage and you are approached by the lender with the offer of refinancing. They will tell you, if you refinance, you will pay less on your monthly repayments. Most times the reason for the lower repayments is that you are only paying the interest on the loan and after the term is up you have to pay the whole loan in one lump sum or balloon payment. This usually leads to you being unable to pay the whole loan on the due date and this leads to foreclosure and the loss of your home.

Mortgage Elimination Scams:

These scams are usually pin pointed at home owners who are having a hard time repaying their mortgage. Ads are often used in this type of scam, enticing home owners to hire this particular mortgage company and be rid of all mortgage payments. Usually what happens is that you pay out a fee to get the ball rolling on your mortgage elimination, then process a heap of fraud forms against the lender and file phony loan applications. Usually the only outcome is that you are making matters worse and even committing criminal acts, without even knowing it, as well as many other factors that come into it.

There are numerous other scams out there in the mortgage field, always be aware of who you are loaning through and your loan agreements.

The best way to prevent being a victim of a mortgage scam is by using your common sense. Apply in person at a company you know you can trust. Don’t take on more than you can chew. If you need to refinance your loan make sure that you know exactly what and how much you will be paying and how much your loan will be after all new charges have been added. Never believe in anything that seems too good to be true, because most times it probably is.

The fine print on your mortgage papers is incredibly important to read because if you don’t you may find yourself in a predicament that you really don’t want to be in. You should read every page of the fine print and take as much time as you need to do it. This way you know you are not getting anything more than what you want. In the end it could save you a lot of time and money. Below are some of the things you should look out for while reading the fine print on your mortgage papers.

Balloon payment: you should look for this in your mortgage fine print if your loan isn’t that of a balloon loan. Sometimes the lenders will put this is your fine print when it really isn’t meant to be there. A balloon payment is when you pay only the interest on your loan and nothing off of your actual principal. This keeps the repayments small and most customers are pleased with this, until they discover the need of a balloon payment at the end. Paying off a large balloon payment is often impossible to do and can cause you to lose your home. So when checking the fine print, make sure a balloon payment is not in your fine print so you won’t be caught with any surprises and an incredibly large payment.

Note: You should always be aware for the terms stated in the note. The note is usually where they state if you have not paid your repayment in a certain amount of days the lender has the right to sell your home and you are liable for anything else like extra fees and the banks also has the right to take any of your assets and finances if you do not make your payment.

Notice: you should read this part of your fine print very carefully. This part of the document will tell you how much notice you will receive if you haven’t paid your repayment, sometimes it will tell you that you will receive no notice. Make sure you remember to send your payment if you go on a holiday. Send your payment early so you will not have to worry about your check getting lost in the mail. The best way around this problem is to see if you can send you payment via wire transfer so you know it is going exactly where it is meant to be. Also another thing you should look out for in the notice section is whether or not you have time to make up for the missed payment or whether it will just take action on the preceding of foreclosure.

Acceleration: this clause gives the lender the right to speed up the time when your mortgage loan is due and has the right to ask for the full amount due on your loan straight away if you miss a repayment. Also you should look for what notice they will give you in the event that this happens because sometimes it is said to give no notice.

Extra fees: always look out for any extra fees that you do not recognize when reading your mortgage fine print so you do not get hit with these fees that you are not aware of.

Another thing that you should look out for when reading your mortgage papers fine print is to make sure that everything is as it is agreed upon. Be sure that all of the closing fees, interests and other such terms are the same as first agreed upon.

Reading your mortgage paper’s fine print can be a big job but it is incredibly important one. You need to know what you are signing and agreeing to. While reading, take as long as you like and don’t let anyone pressure you into moving the process along. If you are confused about any of the terms stipulated in the fine print or have any questions then go ahead and ask them. Get a clear definition of what all terms mean and what they are all about. Also don’t be afraid to get another person to look the fine print over, like a trusted friend or your lawyer to see what they think. They may be able to point out something that you missed. It is better to be safe than sorry.