In today’s dynamic financial marketplace, mortgage holders have more options than ever before when it comes to choosing the mortgage loan that will best suit their needs. Lenders have become creative when it comes to mortgage products, so that buyers can pick a program that will work best for them. Here are some of the most popular types of home loan products available today:
- The traditional 30-year fixed mortgage. This loan is exactly what it says it is: 30 year repayment period with a fixed rate. People who choose this loan have a definite benefit in knowing that their interest rate will never go up, and aside from property taxes, their mortgage payment should stay consistent as well. The 30 year fixed rate mortgage is perhaps the most popular of all mortgage products.
- The ARM or Adjustable Rate Mortgage. This mortgage product is popular with people who would like to get more house for their money. It was originally designed for people who foresee increases in income over the next several years, and can afford to keep up with increasing payments once the loan “resets” and the rate increases. Many people still like this loan because it allows them to get into the house they want at a low rate, and they can always refinance later. Originally the loan has a very low rate and over time that rate increases until it reaches its cap amount. This can vary by loan so be very careful when choosing one of the ARM mortgage products.
- Interest Only Mortgage Loans. This mortgage product allows buyers with modest incomes the option of paying just the interest on their loan for the first 7 or 10 years. It allows people to be able to afford a home and pay just the interest, keeping the payments lower. At the end of the interest only period, their payments will increase because they will pay both the interest and principal, but it helps to get them into a home early in the game. This loan is good for people who expect an increase in income, much like the ARM, but the rate often stays the same with an interest only loan.
- Balloon Mortgages. These type of mortgages are designed for people who plan to move within about 5 to 7 years of purchasing the home. They have a low mortgage interest rate, however at the end of the loan term, the final amount must be paid or else the borrower will have to refinance or take out another loan to make the total repayment. This large amount at the end of the loan’s life is called a balloon payment.
- Jumbo Mortgages. The jumbo mortgage is designed for people who have received a larger than average loan. It is usually written by either Fannie Mae or Freddie Mac. Although the loan is large, there are still limits on it, and they usually require a higher down payment than most loans. Be sure to speak with a mortgage professional about this or any of these popular mortgage products.