Mortgage types: What are your options to take out a home loan?
It can be said that there are as many mortgage types as there are needs. The type of mortgage you need is primarily dependent on your financial situation. Therefore, you can work with your lender to find which mortgage suits you the best. A good lender will assess your assets, your credit report and your employment history to suggest a mortgage loan that will work best for you.
Types of mortgage loans:
Go through the following lines to know about 9 different mortgage types.
1. Interest-only mortgage: In case of interest-only mortgage, you need to pay only the interest for some initial months, after which, you need to make payments towards the principal as well as the interest.
2. Fixed rate mortgage (FRM): It is a type of mortgage where the interest rate remains fixed through the loan term. You can choose from 15-year, 10-year, 20-year and even 50-year fixed rate mortgages.
3. Adjustable rate mortgage (ARM): It is a home loan with variable interest rate. The interest rate remains fixed for a certain period, after which it gets changed periodically.
4. FHA loan: FHA (Federal Housing Administration) is a part of United States Department of Housing and Urban Development (HUD). FHA loans usually require lower down payments and it is relatively much easier for you to qualify.
5. Option ARM loan: Option ARM loans are basically adjustable rate mortgages, whose interest rates fluctuate from time to time. You can choose your payment structure from a variety of available options.
6. Equity mortgage loan: You can take out an equity loan when you are in urgent need of cash. Equity loans can be fixed, adjustable or a line of credit from which a borrower can take out funds as per requirement.
7. Piggyback loan: It comprises of 2 loans – a first mortgage and a second mortgage. It can be FRM, ARM or a combination of both. You need to take out a piggyback loan when you’re unable to afford 20% down payment and want to avoid paying private mortgage insurance.
8. Construction loan: You can take out a construction loan if you’re planning to construct a new house. These loans require interest only payments during the time of construction and the loan amount becomes due upon completion, that is, when the owner occupies the home.
9. Reverse mortgage: You need to be more than 62 years of age in order to take out a reverse mortgage loan. Instead of the borrower making the monthly payments, in reverse mortgage, your lender makes monthly payments to the borrower. Lender continues making the payments as long as the borrower resides in the home. You can take out a reverse mortgage to convert a part of your home equity into a tax free income without having to sell your house.
If you are not able to decide which mortgage types suit your requirement, simply ask yourself how long you are planning to stay at your home. It will help you to make your choice. Therefore, prioritize your requirements and discuss with your lender to find the best suitable mortgage for you.
Useful Sites:
Free Mortgages Quotes 800-675-9783- Somerset Mortgage Lenders has been in business since 1979, are you looking to refinance your mortgage, consolidate your debt, improve your home, or a new home loan, we can help.
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