If you’re stuck with a high monthly mortgage payment from a home loan you obtained a while back, you may want to consider refinancing your mortgage with today’s current rates and APR’s. Mortgage rates in general are at historic lows and are suspected to remain at these levels throughout 2013.
Types of Mortgages Available:
Fixed Rate Mortgages – Fixed rate mortgages are the most popular loan products on the market. These loans are amortized over varying set of durations of time (usually either 15 years or 30 years, but sometimes with 10, 20 and even 50 year terms). Because they are amortized – meaning the interest and principal are combined into equal monthly payments – over a predetermined set of time, they are relatively straight forward and allow the borrower to know exactly when his/her loan will be paid off.
Adjustable Rate Mortgages – Adjustable rate mortgages are not as straight forward as fixed rate mortgages. With an adjustable rate mortgage, the APR you obtain at the time of the loan is simply your start rate. This rate will increase and decrease depending on market conditions. You’re monthly payments therefor are not set in stone and can change regularly as well. To calculate new payments you’ll need to add the index plus margin. For example, if on your adjustment anniversary the index moves from 2.5% to 3.5% with a 2.0% margin, your interest rate will have risen from 4.5% to 5.5%.
FHA Loans – These loans are insured by the government through mortgage insurance that is wrapped into the loan. They are ideal for first time home buyers or those with less than ideal credit because FICO scores are irrelevant. They have a maximum mortgage limit due to fact that they are more risky to the lender and issuer. As of January 1, 2009, the maximum mortgage limit in high-cost areas is 115% of local median prices, not to exceed $625,500. The maximum conforming loan limit is $417,000 for single-family residences nationwide. Consumers can obtain an FHA loan with less than 20% down.
VA Loans – These are government backed loans available to United States veterans and, in most cases, widowers of diseased veterans. The primary advantage of these mortgages is that a down payment is not needed to obtain the loan. The rates and terms of the mortgage depend on tenure spent with the military and whether the discharge was honorable or dishonorable.
Interest Only Mortgages – These mortgage types come in several different forms. Reading the fine print and fully understanding the terms and conditions associated with these loans is essential prior to obtaining it. Interest only mortgages are loans secured by the value of the property with the option for payment. These loans hit the main stream during the housing boom of the mid 2000′s and were often the product of shady lenders. However, despite the negative reputation of interest only loans, they can still be effective and valuable to the consumer if due diligence is conducted by the borrower.