If you’re looking to get the best deal for your mortgage loan, you need to understand the different types of mortgage. With that said, here are some of the most popular types of mortgage loans in the market:
Common Mortgage Package:
A fixed-rate mortgage deal is the most common type of mortgage in the market, and it’s the one that most people often settle with. These are long-term mortgage plan that can go on for up to 40 or even 50 years. You can either go with a fully-private loan or an FHA loan which is partially funded by the government. Most first time home buyers often go with the FHA, as it’s insured by the government, and if you qualify for additional benefits from the government, you may get a special rate on the interests as well. For example, if you have served in the U.S. Armed Services, you may be qualified for the Veteran Affairs program, which means that you don’t need to pay for the down payment with a minimal interest rate.
For an interest-only mortgage, each monthly payment you make is only for the interest, which means that the monthly payment will be significantly lower than a fixed-rate mortgage. However, the borrower will have to pay for a lump sum at the end of the term, meaning that they will still have to save money to pay for that sum by the end of the deal. It’s often a good option for those who expect their income to increase consistently in the future, as they may not be able to afford to pay for the full installment in the first few months or years.
Adjustable-rate Mortgage Package:
There are several types of adjustable-rate mortgages (ARMs). You adjust most of them to fit with the financial situation of each borrower, but there are other factors that will affect the interest rates and down payment as well.
Option ARM Mortgage
Option ARM mortgage is quite complicated to explain, as it’s an adjustable-rate mortgage. What this means is that the interest rate will fluctuate depending on the credit scores, the financial situation, and the current economic state. The agreements for an option ARM mortgage are different, so you will have to review what your agreement entails.
Combo/Piggyback Mortgage Loan
This is the type of mortgage when a borrower has more than one mortgage at a time. The mortgage can either be an ARM, fixed-rate, or a combination of the two in one way or the other. You can often do this to avoid paying for additional private mortgage insurance.
A mortgage buydown is a type of mortgage with the lowest interest rate, as the interest rate will be depending on the down payment. The higher the down payment, the lower the interest rate. This is a good option for buyers who could afford a large down payment.
Specialty Mortgage Loan:
Streamlined-K Mortgage Loans
The Streamlined-K Mortgage program allows a borrower to combines the house repair costs into the mortgage loan. The typical 203K loan program offers the same thing. However, the SKM program is much easier to file for, as there’s much less paperwork involved.
These types of loans allow homeowners that have their properties on the market listing to take out another mortgage. Hence using their property in the market as collateral.
Equity Mortgage Loan
Equity mortgage is similar to bridge/swing loans. However instead of using a property, the equity is collateral on their asset instead.
A reverse mortgage is for an older homeowner with enough equity. This ensures that they have a place to live in until their death or if they decide to sell their home. The borrower doesn’t have to pay for the monthly payment. You pay off the mortgage with the equity and the property of the homeowner once they pass away. You have to be older than 62 years old to qualify for this type of mortgage.
If you’re looking for a trustworthy and reputable mortgage broker, Aceland Mortgage is here to help. Contact us today for more information.