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Different Types of Home Mortgage Loans

Usually when anyone thinks of buying a home they think in terms of a mortgage for that home. This is getting a loan against the home that you are going to buy and paying a monthly sum to repay the loan. When looking for a mortgage for any home you must be aware that there are different types of mortgages available from different institutions and it is prudent if you look around and find one that best suits your needs and situation.

The oldest type of a mortgage loan which is still prevalent is the fixed rate mortgage. These mortgages are available for terms from 10 years to 30 years. The rates on these mortgages are fixed for the term of the mortgage.

An adjustable rate mortgage on the other hand has rates that vary according to the interest rates prevalent in the market. The rates go up when the market interest rates go up and the rates go down when the market interest rates go down.

Veteran’s affairs loans on the other hand are mortgage loans given by the department of veteran’s affairs to people or spouses of people who have served in the armed forces. The terms and condition of the veteran loans are dependent on the years of service with the armed forces. The best part of these loans is that you do not have to make any down payment.

Federal housing administrative loans are backed by the federal government These loans are more popular with first time home buyers since the criteria for eligibility for these loans is much less stringent than mortgage loans from other institutions. Also the down payment on these loans is usually much less than any other mortgage loans.

Another type of mortgage loan that is available is the interest only mortgage loan. In this type of a loan that you only pay the interest on the loan, but the interest is calculated in a way that it includes the interest and the loan amount. These types of mortgages though are only available for a certain length of time.

Second Mortgages

Second mortgages at times can be very useful if you are in need of a large sum of money. But the risk you take in getting a second mortgage is that you put your house on the line if you have difficulties and cannot make the mortgage payments.

Just like the first mortgage, second mortgages can have some large fees attached to them and you do not want to be paying those fees if possible. It is better that you not get a second mortgage that would lock you in or have high fees. The thing to remember is that your house would be in jeopardy if you cannot meet your payments. One of the ways to keep that second mortgage low is to see that there is no voluntary insurance in the contract if you already have one. Check your first mortgage and see if you are already covered by insurance and that you do not need one attached to your second mortgage.

With second mortgages you should look into packages that look too good to be true with low monthly payments. Sometimes these packages have very low monthly payments, but include a huge balloon payment at the end. While at times this may be a good option, but if you are unaware about it when you sign the mortgage it could be a problem if you cannot come up with the huge payment at the end or it may cause you some financial difficulties if you are not prepared for that payment. You should also make sure about how your payments would be, whether they would be increasing as the time goes by or would they be decreasing and you have to be sure that you can make these payments.

If possible use the services of a mortgage broker when getting a second mortgage. Second mortgage deals are more complicated than the first mortgages and it could be difficult for you to sort through. Besides by using the services of a mortgage broker you can get him to check out what different lenders are offering and get the best deal that suits your needs. It is not necessary that you get your second mortgage from the same lender who holds your first mortgage.

Why Refinance Your Mortgage

There are many reasons you might want to refinance your mortgage. Maybe your credit score has increased and you could possibly get a new mortgage at a lower rate or maybe you are not happy with the service you are getting from your present mortgage company or maybe you just want to change to a different mortgage.

One of the reasons you may want to refinance your mortgage is to receive lower interest rates. If your credit score has gone up since you got your mortgage it may be time to refinance and get a lower rate of interest as this will lower your monthly mortgage payment as well as help you develop equity in your house at a faster rate.

If you want to maybe change the lenght of the mortgage. You may consider increasing the length on your mortgage to lower your monthly payment. This though will increase the amount you would wind up paying on your mortgage. On the other hand you may want to reduce the length of time on your mortgage. Though this may increase the monthly payment. It would reduce the amount as well as the interest rate.

If you have a mortgage with variable interest rates, you might want to change to a fixed monthly rate so that you know what you will be paying monthly instead of the rates changing and having to pay differing amounts monthly. On the other hand, you may want to continue with the variable rate mortgage, but you may want a better interest rate or better terms of payment. You could refinance your mortgage and get the terms you are seeking.

You may also want to refinance your mortgage if your home value has gone up and by refinancing the mortgage for a higher amount you could get cash for the equity you own in your home. If you need money for repaying credit card debts or to make home improvements or for any other reason, this is one way of being able to get the money that you need.