When it comes to real estate transaction, one of the most significant factors is being able to secure the proper mortgage loan. Luckily, the borrowers of today have different options that are available to choose from. All that it takes is to have good credit and earn enough income and this shall lead to what type of option suits the situation the best.
1) Fixed Rate Loans
Fixed rate loan is considered as one of the most traditional choice when it comes to real estate mortgage. The debt here is fully amortized, thus, there is a fixed interest rate with regards to the interest and life of the loan. Also, the principal is distributed all over the term, thus balancing the monthly payment and making it constant every month. This option has been considered as one of the safest mortgages due to the predictability of the real estate loans.
2) Balloon Real Estate Loans
Balloon loans can be compared to fixed rate loans but it only acts like it for a period of time. While on the 10th year or 15th year term, it's payment and interest rate shows low, but once the end of the period comes, the whole remaining balance becomes fully due. It might look or seem that it's impossible to repay this debt but when you analyze it, it really is designed in order to be repaid before the due of the balloon payment comes. The payments and low rates definitely serves as the advantage of this loan option.
3) Jumbo Loans
If you are deciding to buy real estate in the more expensive places in the country, your typical option should be the jumbo loan. These jumbo loans can basically cover the price required to purchase the said real estate.
4) Adjustable Rate Mortgages
ARM is well known because from the start it showcases very low interest rates. From the 1st up to the 10th year, this is how the initial period may last. But when it becomes finished, the interest rate can rise or fall depending on the different market indexes. This type of loan can serve very fitting for new home buyers. It also serves well for those people with poor income. The disadvantage or scare of this loan showcases on the rate period that can be adjusted. There is no constant monthly payment because of the adjustable rates. You might find it hard to organize and plan your finances when it comes to how much you will need.
Last update: 30.06.2016
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