Types of Mortgages
September 20, 2009 by admin
Filed under Mortgage Loans
If you are considering buying a house, it is important to choose the mortgage type that best fits your situation, from amongst the various types of mortgages available. In choosing a mortgage, individuals should find an option that, based on their income, they will be able to pay off in a timely manner. A recently conceived type of loan is one known as a reverse mortgage.
This type of mortgage is based on a payment method that compensates the buyer instead of the lender. Reverse mortgages were developed to assist retired individuals who no longer work, but are still responsible for monthly mortgage payments. The first reverse mortgage was the creation of the federal government and these mortgages are now available across America.
Although these mortgages are readily available, provided an individual meets the age criteria, it can be a somewhat complicated process, but the advantages are worth the extra effort of dealing with the federal government. Homeowners are given cash, stemming from the equity accumulated, based on the market value of the home. The amassed equity, converted to cash by the federal government, can be used by the buyer to pay the mortgage off after they retire.
Another loan option is one which has a fixed interest rate in the first few years of the loan, but becomes an adjustable rate for the balance of the loan until it is paid in full. The rate of interest is governed by the success or failure of the property market at the time. If the property market is successful, much money can be saved, there is the risk of a failing market.
For a more predictable mortgage, a fixed interest rate mortgage is another option. The interest rate on these mortgages remains the same for the life of the loan. No matter what happens in the housing market, home buyers with a fixed interest rate mortgage will not have any surprises.
Another type of mortgage available is known as a Federal Housing Administration mortgage (FHA). An FHA mortgage is targeted to assist people who are buying a home for the first time or have extremely low incomes. These mortgages offer very low financing fees and interest rates, through federal agencies, for those desiring home ownership.
When you are able to qualify, an FHA mortgage is an excellent option, but only one FHA can be held at any given time.
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