Mortgages come in many shapes and sizes. They vary in terms of duration, structure, interest rates, and many other factors. We'll provide you with a few examples so that hopefully, you can find the one that's right for you when it comes time for you to purchase a home!
30 year fixed rate mortgage
This is the most popular type of home loan because of it's low-interest rates, which does not change for the entire duration of the loan, which is 30 years. Although they may have higher interest rates than other loans, you can make pre-payments which may help you save more in interest payments overall.
15-year fixed-rate mortgage
These types of mortgages usually have a lower interest rate, and the loan can be paid off in half the time (since the term is for 15 years). Although the monthly payments may be higher, you may be able to save tens of thousands overall in interest payments.
Adjustable Rate Mortgage
This is for someone who is looking for an alternative to a fixed rate mortgage. It has a low-interest rate for the first few years, which is adjusted every year. The adjustments usually have a limit, for the most part, so you won't see a big increase in the rates in one year. Over several years, however, the rates can increase enormously. This is an option for someone who is only looking to spend a few years on their property and not as common as the other mortgages.
Little to Nothing Down Mortgage
With most mortgages, people generally make a down payment of at least 20%. If not, you may have to obtain private mortgage insurance, which adds another monthly cost to homeowners. Many loans, such as VA and USDA Rural Development loans offer "$0 downpayment" loans. Others such as Fannie Mae or Freddie Mac allow you to make down payments as low as 3%. FHA Loans are also an option, and allow you to obtain a home with only 3.5% down. The downside is that you'll be starting with little or no equity, and if the value of the home drops, you may end up owing more than your home is worth. You may also have to pay a higher interest rate throughout the duration of the loan.
These types of loans are for those who are looking to purchase homes $500-750,000 or more. You might be required to put down more than 20% for your down payment.
The Refinanced Mortgage
A refinanced mortgage is when you take out a new home loan that pays off the old one. People usually refinance their home when interest rates drop, mostly in comparison to the rates of when they first got their loan. This allows homeowners to make lower monthly payments, and save more. Some homeowners also change the terms of their loans, going from a 30 year fixed rate mortgage to a 15-year mortgage, or even going from an Adjustable Rate Mortgage to a fixed rate mortgage. One thing to keep in mind is how long you will be in your home. People who plan on moving should calculate their "break-even point", and make sure it's a financially sound decision if they plan on moving in the near future. Another reason homeowners will refinance is that the equity in their home has increased and they would like to pull some equity out of their home for a specific purpose (for example: renovations).
Whatever the loan, we can assist you with your closing, and helping your find the right lender for you!
At Grimaldi Law Firm, your future is our present.
Melinda Grimaldi is an attorney in Hollywood, Florida, whose practice is concentrated in the areas of commercial and residential real estate and estate planning law.
She can be reached at (954) 491-8707
The information on this blog is of a general nature and is not intended to answer any individual’s legal questions. Do not rely on information presented herein to address your individual legal concerns. If you have a legal question about your individual facts and circumstances, you should consult an experienced real estate attorney. Your receipt of information from this website or blog does not create an attorney-client relationship and the legal privileges inherent therein.