In today’s hard times, it’s important to arm one self with descriptions of different types of mortgages. Up until now, I really didn’t know or care that much about mortgages. I find however, that ignorance is not bliss, and having descriptions of different types of mortgages, can help you sort out what kind of mortgage will fit your lifestyle. Surfing the internet will help, but talking to a mortgage broker will also help you, understand this very complex financial world.
There is a general heading for the descriptions of different types of mortgages. The two main headings are Fixed Mortgages, and Adjustable rate Mortgages. All the other sub headings fit under these two descriptions of different types of mortgages.
Fixed Mortgages are very much what the name says. The interest and mortgage monthly payment stay the same. It doesn’t depend on what the economy or interest rate does. The interest and payment are fixed. Usually you can get a 15 year or a 30 year fixed mortgage. This is the most preferable in these uncertain times. Many that have Adjustable rate mortgages are refinancing to get fixed mortgages. It’s a little more difficult to get a fixed rate; you must have very good credit, money in the bank, at least 20% down, and money for closing costs. These requirements are not as stringent, when it’s not a brand new mortgage, and you are just going from an Adjustable Rate Mortgage to a fixed mortgage.
The adjustable rate mortgage or ARMs are mortgages that reflect the economic conditions. If the prime interest rate goes up, so does the interest and monthly mortgage payment. If it goes down, so does the mortgage. Under these two general descriptions of different types of mortgages, there are some subheadings of mortgages. There are a few that could fit under either general type.
The Balloon Mortgage is usually 5-7 years with big balloon payment at the end. Most are refinanced for a 25-30year mortgage. However, it must be stated in the contract from the start that you can remortgage, before the balloon payment, so you better be sure you read the fine print.
The Jumbo or Nonconforming mortgage is a loan larger than the cap set by the large loan agencies.
The assumable Mortgage is when a new buyer takes over without refinancing. This must be in contract when applied for, or it cannot qualify as an assumable mortgage. Under some conditions some terms maybe changed, and closing costs will be involved. Both types fixed and ARMs can be assumable.
Interest only mortgages are the same as interest first mortgages. Interest is paid first, without paying anything on the principle. This is more expensive over the life of the mortgage because the principle isn’t paid down till the end.
These are the descriptions of different types of mortgages. The best thing to do however is hire a mortgage broker that is reputable, and will look out for your interests. They are professionals, and with the complex way things are in the financial world it’s good to have someone who is certified, in mortgages, and will help you make the best decision for your financial situation.