Mortgage Loans - 7 Options
Tuesday, March 23rd, 2010Mortgage loans - 7 Options to decide which is best for you
If you are planning to take out a mortgage, then you should know that there are different types of home loans and you should choose one as per your needs and financial condition. Knowledge of Mortgage Loans will help you to decide which home loan will serve your purpose.
7 types of mortgage loans are discussed below.
- Adjustable Rate Mortgage (ARM) - In this type of mortgage, you need to make your monthly payments on a fixed rate of interest for a specific time period, after completion of which the mortgage rate will change periodically. The rate will vary as per the index that your mortgage lender has chosen.
- Fixed Rate Mortgage (FRM) - In an FRM, the interest rate remains fixed throughout the loan term. There are several types of FRM (such as, 10-year, 15-year, 50-year, etc.) and you can choose the loan term that best suits your financial condition.
- Interest-only mortgage - If you take out an interest-only mortgage loan, then you need to pay only the interest for a certain time-period; after that period, you’ll have to make monthly payments towards the interest as well as the principal amount.
- Option ARM loan - In this type of Adjustable Rate Mortgage, the interest fluctuates from time to time. There are several payment structures and you can choose one that suits you the best.
- Piggyback loan - It is a mortgage loan comprising of 2 loans - a first mortgage and a second mortgage. You can obtain a piggyback loan when you’re unable to make at least 20% down payment on a home. You can choose from 80-10-10 mortgage or 80-15-5 mortgage.
- Equity mortgage loan - You need to pledge your home equity in order to take out equity mortgage loans. You can choose from a fixed, adjustable or a line of credit that offers you the flexibility to take out funds as per your needs until you exceed the available credit limit.
- Construction loan - As the name suggests, you can take put this mortgage loan when you’re planning to construct a house instead of purchasing a home. You need to make interest only payments during the time of construction and the loan amount becomes due when you occupy the home.
While choosing a mortgage loan, it is quite important to assess your financial condition and decide whether or not you’ll be able to make the monthly home loan payments on time. In doing so, make sure you make a rough estimate of the monthly home loan payments for the entire loan term as the interest rate on some mortgage loans may change after the completion of a specific time period.
Author’s Bio (Samantha Taylor)
Samantha Taylor has good knowledge of financial topics and she likes to share it by writing articles on several finance websites. Her articles on the basics of Mortgage Loans, reverse mortgage, home loan modification, ways to avoid foreclosure, etc. will help you gather knowledge about the mortgage industry.