Determine The Length Of The Loan

Category: Finance.

There are many new types of loans available for financing your new home purchase. You have a few options such as 15 years, 20 years or 30 years.

Determine the length of the loan. There are even some circumstances when the loan can be set for 40 years. A shorter length of the time will give you higher monthly payments, but less interest will be paid. This is how long the lender sets for the term of the loan. Decide on the type of mortgage. In the United States you have the option of a government insured FHA loans or a VA loan available to veterans who have served in the U. A fixed- rate mortgage is the most common with a fixed interest rate over the life of the loan.

S. armed services. With time, the principal is paid down. Your typical loan payment includes interest and principal. Other factors affecting your payments might include the option to pay interest only for a certain period. A negative amortization loan allows you to pay less than interest- only. This will allow you to make lower payments but doesn t reduce the size of the loan.

The shortage of the payments are added to your. A hybrid loan is a type of loan where the terms are fixed for a certain period but payment options vary. This type of loan offers the lowest possible payment for a minimum number of years. A 30 year fixed loan that allows interest- only payments for the first 10 years is a hybrid loan. They are adjustable rate mortgages with the options of a payment and interest variety. An Option ARM mortgage loan is complicated.

Piggyback or combo mortgages are first and second mortgages combined. Another type of special mortgage loan is the bridge/ swing loan. Borrowers take out two loans if they have less than the 20% down. With this type of loan the seller uses the equity in the first home to buy another home. The lender makes the monthly payment to the borrower as long as they reside in the home. A Reverse Mortgage is available for anyone over the age of 62 who has enough equity in their home.

Many mortgage loans come with a prepayment penalty. If you have a prepayment penalty in the original loan you will have to pay a penalty according to the terms of the loan. You must make this payment if your loan is repaid too quickly. You may be allowed to cash out on the equity in your home. Generally lenders won t allow you to cash out until 6 months to a year after you purchase the home, no matter how much equity is built up. The value of your home rises over time allowing your use that equity for financial needs.

Many mortgage loans are available for real estate investors. Lenders restrict the total number of properties an investor may finance. Using 100% financing for single- family homes gives the investor leverage. By doing some research and asking questions, borrowers can find the financing that will fit their needs.