It might take a little time and effort on your part to understand various mortgage loan options available in today’s market, but in the long run, you will be glad that you invested in this research. A mortgage loan is probably one of the largest debt you’ll ever take on, and in most cases, your interest payments sum up to a bigger total than the principal you availed. So it becomes essential that you choose the option which will be a best fit for your financial situation.
Some of the common loan types are:
Fixed rate
As the name suggests, the mortgage rate remains fixed for these loans. The duration of the loan may vary from 10, 20, 15, to 30 years.
For those who want predictable monthly payments, and are comfortable even if it means paying a little extra, this is a good choice.
Adjustable rate
The rate for this type of loan can change after an initial period of fixed rate. Normally, the change occurs yearly and there is a cap included. For example, if initial rate is 6.5%, annual cap is 2% and a 6% cap over the lifetime of the loan, the rate will stop changing after it reaches 12.5%.
This is a good option if you want to buy more on a lower current income, and are sure that your income will significantly increase with time.
Reverse mortgage
Using reverse mortgage, you can convert your owned home equity into cash. This allows the homeowner to borrow cash against their home, and no repayment is required until the borrower dies or the home is sold.
This is a suitable way to generate extra income for people in their late sixties or older, who own their home and are planning to live there for a long time, and are worried about future expenses.
Mortgage refinance
Do you think your current monthly mortgage payments are a little too much? Or are you looking for a way to convert the equity you have earned in your house into cash? Well refinancing may be a good option for you then.
Refinancing basically means taking a new loan at better terms to satisfy previous loan. But make sure you are planning to stay in your home for at least a few years to make the paperwork and refinancing costs worth it.
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