When it comes to home loans, there is a lot of information to digest when trying to determine which mortgage is right for you. Whether you are trying to find the right mortgage lender, identify a beneficial housing program, or figure out whether you want an FHA or USDA home mortgage, this site has lots of information to help you sort through it all. If you enjoy your home but feel like you are in over your head and selling it is your only option to financial stability – don’t fret. There are steps you can take and lenders who can help you avoid bankruptcy or foreclosure. Whether you are a first time home buyer, or a current home owner looking for advice on how to refinance, we hope you find the answers you are looking for here.
What is a Mortgage?
A mortgage is a secured loan using the financed home as collateral. An interest rate, often called an APR or annual percentage rate, is also applied to the principle of the mortgage which is a lender’s fee for allowing you to borrow the money. The interest rate can change based on the loan agreement with your home loan lender in the form of a Fixed or Adjustable Rate Mortgage (ARM). Read more about these interest types here. Other aspects of your mortgage that you will need to define with your lender and after going over your own monthly budget is pay frequency, payment amounts, terms, interest rate, interest type and prepayment.
Repaying Your Mortgage
- Capital plus interest: this is the most common type of repaying your mortgage that combines the APR and the capital (principle) in regular payments: often referred to as self amortization. Payments are typically made monthly for 10, 15 or 30 year terms. In the beginning the payments will be predominantly interest rather than principle. This will change as you progress through your loan term by an amortization schedule.
- Interest and partial capital: Also referred to as a balloon loan or partial amortization loan and more common in commercial loans rather than residential. Payments are made on the capital and interest but the loan has not fully amortized by the end of the loan term meaning the borrower has to make a large payment when the loan is due. The balloon payment amount is stated in the loan agreement.
- Interest Only: These are higher risk loans also called an investment backed mortgage, capital is not repaid within the term’s agreed upon. A separate account is made payments to with the result being a lump sum payment towards the mortgage at maturity.
- No interest or capital: Often called reverse mortgages or lifetime mortgages this loan is typically used by older consumers usually in retirement as this loan requires certain age restrictions. This payback plan allows the loan to increase the debt each year by rolling up the capital and interest with final payment being at the death of the borrower through life insurance or other means.
- There are many other variations to fit almost every lifestyle such as Hard Money Loans, Graduated Payment Mortgage Loans, Budget Loans, Flexible Mortgages, Bridge Loans and Commercial Mortgages. Visit our FAQs page to learn more about these types.
To find out more about various home loan types and programs, check out our pages on the following:
- HELOC (Home Equity Line of Credit) Purchase
- USDA Rural
- Fixed Rates vs. ARMs
- Loan Modification