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You need to use more than a mortgage calculator to find out which is the best plan for your needs. Here you have a quick guide to help you decide on the best plan for you.

The Different Types Of Mortgage Loan Options

So you have decided to purchase your own home and you need to find out which type of home loan is the best for you. There are basically three main types of mortgage loans available so let us have a look at them and try to find one that will best suit your requirements.

1. The Fixed Mortgage Loan.

30 year fixed rate: this loan is probably the most popular type of arrangement because it provides for low monthly repayments and is usually chosen by people who will stay in their home for a long time. One of the advantages is that you will have more money in your pocket each month. A disadvantage is that you will pay more for the loan in the end compared to shorter type loans.

15 year fixed rate: this loan allows you to pay your mortgage off in 15 years. You will save money in the long run. An advantage of this type of loan is that you pay half the interest of a 30 year loan. A disadvantage is that you will have to pay higher monthly repayments during the term of your loan.

Biweekly loan: this type of loan is generally done on a 30 year fixed rate plan. By paying every fortnight though, you pay extra payments every year and you generally find that you will pay off your loan in about 23 years. This loan also builds your equity in your home much faster. An advantage is that you pay your home off faster and you pay less interest. A disadvantage is that you have to pay every two weeks.

An Adjustable rate mortgage or (ARM): this loan is good because of the way in which it works on interest rates and they generally are lower at the start than a fixed rate home loan. This means you will pay less each month but you have to consider the disadvantage of paying higher interest if the rates go up.

An obvious advantage is that when the interest rate drops so do your repayments. Alternatively, a disadvantage is that if the interest rate rises so do your repayments.

2. Convertible loans:

Included in these options are Hybrid and convertible ARM type loans. One is an ARM that lets you convert to a fixed rate or a fixed rate home loan that you can covert to an ARM. This means that you have the option to change your mortgage loan after a few years if you wish. An advantage is having the ability to change between ARM and fixed rate. A disadvantage being that if interest rates are high you might not wish to convert.

Interest Only Loan: this type of loan is beneficial for those who work on commission or can get big bonuses so they only pay the interest on their loan and when they get their bulk income they can put it towards paying off the actual loan. An advantage is that you are able to secure a bigger loan amount. A disadvantage being that you have to pay in lump sums and when you only pay the interest then you are not paying anything off on your house loan.

Balloon loan: this type is a fixed rate loan with small monthly repayments that generally last about 7 years. Then you must pay the loan in one big lump sum or have the option to be able to refinance. An advantage for people who will want to sell their house before the balloon payment is due and also low interest rates. A disadvantage being that you have to pay a lump sum at the end of the loan term or refinance at usually a higher interest rate.

Reserve mortgage loan: this type of loan is ideal for equity rich seniors. It requires no monthly repayments. An advantage is that you will have more money in your pocket. A disadvantage is that the loan needs to pay if you sell your house and reduces equity for inheritors.

Buy down mortgage loan: there are two types involved here, a temporary and a permanent loan. They both work on points and lower interest rates. An advantage is lower repayments. A disadvantage is that you need to pay a higher down payment to lower interest rates.

3. The Special Mortgage:

FHA mortgage: for first time home buyers, people who have only a little down payment and credit problems. An advantage being a low down payment and repayments. A disadvantage is the cap on the loan and limited mortgage options.

Veteran Affairs Loan: this is only for people and widowers of the armed forces. An advantage is that there is no down payment necessary. A disadvantage is that it is not available for everyone and usually takes longer.

So, there are many types of loans available to you when you want to buy your own home. To find out which one will the most beneficial for your needs is to consult a financial professional and they will go through them with you one by one.

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Everyday the home loan market launches new products. As a result there is hundreds if not thousands of choices and it can be overwhelming if you need to choose a home loan.

Basically, they can be broken down into the following 8 types.

1. Standard variable home loan (with 100% offset)

2. Basic variable home loan

3. Fixed rate home loan

4. Low-doc home loan

5. Introductory home loan

6. Line of credit mortgage

7. Non – conforming home loan

8. No deposit home loan

When looking out for a home loan, which home loan is going to suit your requirements?

You can get online and use a mortgage calculator to give you an indication of how much it will cost to have a home loan and what the repayments will be. This is a very useful tool to estimate if you can afford a loan or not.

This indicates the major types of loans available. The important thing when looking for a loan is to ensure you know what you are signing up for and you are comfortable with being able to make the repayments.

If you are pushing your finances to the limit with a high repayment amount you should be very careful as you don’t want to default on the loan and give yourself a bad credit rating.

You should consider a fixed interest rate if you are at the upper end of your limit as this will then make sure that your repayment amounts don’t change. If you choose a variable loan and your repayments are taking up a major portion of your salary, then if interest rates rise you really will struggle to be able to make your repayments. The last thing you want is the bank coming around to your house and asking for it back.

So make sure you do your research when looking for a loan. There are so many opportunities online that it is worth investigating all your options online as well as seeing your local bank.

http://www.weekendeasycash.com/loans/Easy_Ways_to_get_a_Loan_or_Mortgage.htm

Author: David Taylortown
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