At the beginning of the mortgage process, borrowers would be wise to start by comparison shopping on different mortgage Web sites, considering both the interest rate and the term of the loan. Homebuyers may also consider hybrid or variable-loan options that lock in a low rate for a specific period of time or set a cap on how high interest rates can rise. Finally, homebuyers can lower their closing costs by making a higher down payment or accepting a shorter loan commitment. For ease of service we would strongly advise you to check with your REALTOR for suggestions on several local loan facilities to compare rates and service. Loan Calculator Mortgage Options - Getting Through the Mortgage Mumbo Jumbo! Years ago most home buyers financed their home with a traditional 30-year fixed-rate mortgage. Not so today! The myriad of relatively new mortgage products empowers home buyers by giving them more choices, but this empowerment comes with a large measure of confusion. That confusion is compounded by the fact that one type of mortgage can be known by different names. Here is a quick guide to some of the options:  | Hybrid mortgage, two-step mortgage, 5/25 mortgage, 7/23 mortgage. All of these descriptors are different names for less volatile alternatives to an adjustable-rate mortgage (ARM). A "hybrid" or "two-step" mortgage starts with a fixed interest rate for five, seven or ten years, then converts to a new fixed rate or an adjustable rate for the remainder of the term. The initial interest rate on a "5/25" mortgage is fixed for five years, while the initial interest rate on a "7/23" mortgage is fixed for seven years.
| | Jumbo mortgage, nonconforming mortgage. The principal amount of a "conforming" mortgage is less than the maximum limit set by secondary market mortgage purchasers Fannie Mae and Freddie Mac. A "jumbo" or "nonconforming" mortgage has a principal amount higher than this limit and a higher interest rate.
| | 80-10-10 mortgage. This mortgage is a creative combination of an 80% mortgage, a 10% down payment and a 10% home equity loan. This strategy is intended to allow the borrower to avoid purchasing mortgage insurance (PMI), which otherwise is generally required if the borrower's down payment were less than 20% of the purchase price of the home.
| | Biweekly mortgage. A "biweekly" mortgage is structured so the borrower makes a payment every two weeks instead of once a month. Each biweekly payment is equal to one-half the monthly payment that would be required to pay off the loan at the end of the term. By making 26 biweekly payments each year, the borrower will pay off the loan much sooner (and save a lot of interest.) But -- the same net effect can be achieved on a monthly loan if the borrower has the will power and discipline to make extra payments (and the required monthly payment will be lower than the biweekly mortgage.)
| | Home equity loan. "Equity" is the difference between the market value of a home and the total amount owed on all the outstanding mortgages. For example, if a home were worth $200,000 and the outstanding mortgages totaled $120,000, the owner's equity would be $80,000. A home equity loan converts equity into a new mortgage. |
With all the different types of loans available in today's market it's important to gather information and find the loan vehicle that might work best for you -- Beware of interest only loans! BACK |
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