When a couple go shopping for their first home they will be faced with a number of mortgage options, the questions is raised, “what is the best mortgage loan program?” Basically there are four common types of mortgages available, they are:
30 year fixed rate mortgages
ARM, adjustable rate mortgages
Hybrid
Interest only
30 year fixed rate mortgage: After all the years that a fixed rate mortgage has been offered, it still is the favorite of the majority of borrowers. The interest rate that is offered will usually be a bit higher than short term adjustable rate loans but this mortgage is ideal for those who wish to develop a long term plan for the finances. Although a term of 30 years is the most frequently applied for, a fixed rate mortgage can also be for a period of 15 or 20 years.
One year adjustable rate: This Mortgage Loan Program is based on a 30 year mortgage but the interest rate is adjusted annually. Over the term of the loan the interest rates can rise and fall but to protect the buyer from financial disaster caps are set on the adjustment. In most cases the interest rate cannot be increased by more than two percent year on year nor can it rise in excess of six percent over the 30 year term.
Hybrid mortgages: These offer a little bit of both fixed and one year variable. The first three or five years of the mortgage will be at a fixed rate, the remaining 25 or 27 years will be converted to an adjustable rate.
Interest only: This type of mortgage is also a hybrid; this loan allows the borrower to pay only the interest on the loan for the first few years, typically five. At the end of the interest only period, the borrower reverts to a typical one year adjustable rate mortgage. Although an interest only loan allows people to get in a house at a lower monthly payment, they may get the shock of their lives once they begin to pay the principle. Instead of paying over 30 years, this factor is now payable in 25 years.
Lenders can be quite creative with mortgage loans, just make sure you understand the intricacies of each.
Members Mortgage Corp. has a mortgage loan program that will suit your financial abilities. Contact them today to discuss their no fee mortgages open to union members only.
