When looking at the various mortgage loan programs, it can be a little overwhelming. There are a wide variety of options to choose from, and they all have some advantages and drawbacks.
Here are a few of the most popular formats, and other things you should consider when asking your mortgage professional for more information:
Your interest rate is set at a fixed percentage for the duration of the loan, so your principal and interest payments will remain constant. Payments are due every month for a set period of thirty years and are generally lower on a per-month basis than other options. However, you will pay more in interest expense over the life of the loan.
The little brother of the 30-year conventional loan, the fifteen-year loan is very similar in the sense your interest rate is set at a fixed percentage for the duration. However, the period is shorter, which means you have less time to repay the same amount. Translation? Lower overall interest costs, but a higher monthly payment.
Yes, it’s quite a mouthful! You have a seven-year payment schedule which is calculated as if it were amortized, or spread, over 30 years. However, at the end of the seven-year timeline, the remaining mortgage balance is due in full. You have the option to pay it off, or refinance into a different loan type. This is often used for real estate investors and individuals who don’t plan on owning the home for an extended period.
Your mortgage interest payment is periodically adjusted throughout the life of the loan based on the market index. This can be a bit of a gamble for borrowers, as you are “betting” on the interest rate remaining the same, or decreasing, during the time you plan to have the loan. Again, these are most common for properties with short-term ownership plans, or when the market rates are likely to continue decreasing over time.
Contact the experts here at Midland Mortgage; we are happy to walk you through the variety of mortgage loan programs available to you.