1 year, 9 months ago
via credit-qna.com
What is the best type of mortgage to choose when buying your home?
I guess there must be several different types of mortgage available, so how do you choose which one is best?
We were once sold an endowment mortgage, where you paid the interest only, but also paid for an insurance policy to cover the capital amount at the end of the term.
It was supposed to leave you with moneyleft over! It was a disaster, when the term was completed and the policy matured, there wasn't enough to clear the capital owing so we had to borrow again to pay it off.
I wouldn't trust another financial adviser.
We were once sold an endowment mortgage, where you paid the interest only, but also paid for an insurance policy to cover the capital amount at the end of the term.
It was supposed to leave you with moneyleft over! It was a disaster, when the term was completed and the policy matured, there wasn't enough to clear the capital owing so we had to borrow again to pay it off.
I wouldn't trust another financial adviser.
images:
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M$4 Answers
There are several different types of mortgages available to those who are buying a home.
The fixed rate mortgage is a traditional favorite but due to changing economic tie, this is not the only choice. But it sill could be the best for your circumstances. It offers the lowest monthly payments of fixed rate loans and the payment never changes. One thing to consider is that the long term of the loan will mean higher total interest paid.
The convertible fixed rate mortgage and covertible adjustable rate mortage are two of the mortgages that change. With the 30 year convertible fixed rate mortgage, the homebuyer pays an extra 1/4 to 3/8 percent in interest plus 1/4 to 3/8 percent of the loan at closing time. The benefit of this is adjusting the rate of the loan without having to refinance.
With a convertible adjustable rate mortgage, homeowners can turn it into a fixed rate mortgage after a set period of time.
An option for older persons with a fixed income is the reverse annuity mortgage. With this kind of mortgage the equity in their home becomes a liquid asset. It is designed to help supplement those homeowners' income. The lender appraises the property and the loan is based on the current value of the home. The lender pays an annuity to the borrower monthly up to an amount equal to the equity in the home.
The FHA and VA mortgages that are insured by government agencies have no or low down payment terms. VA loans are only available to veterans, but FHA loans are available to everyone who qualifies to purchase a home.
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The fixed rate mortgage is a traditional favorite but due to changing economic tie, this is not the only choice. But it sill could be the best for your circumstances. It offers the lowest monthly payments of fixed rate loans and the payment never changes. One thing to consider is that the long term of the loan will mean higher total interest paid.
The convertible fixed rate mortgage and covertible adjustable rate mortage are two of the mortgages that change. With the 30 year convertible fixed rate mortgage, the homebuyer pays an extra 1/4 to 3/8 percent in interest plus 1/4 to 3/8 percent of the loan at closing time. The benefit of this is adjusting the rate of the loan without having to refinance.
With a convertible adjustable rate mortgage, homeowners can turn it into a fixed rate mortgage after a set period of time.
An option for older persons with a fixed income is the reverse annuity mortgage. With this kind of mortgage the equity in their home becomes a liquid asset. It is designed to help supplement those homeowners' income. The lender appraises the property and the loan is based on the current value of the home. The lender pays an annuity to the borrower monthly up to an amount equal to the equity in the home.
The FHA and VA mortgages that are insured by government agencies have no or low down payment terms. VA loans are only available to veterans, but FHA loans are available to everyone who qualifies to purchase a home.
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M$
Hi @enigmatic1500!. Finding the best mortgage for you depends on what fits your and your personal situation since there is no such thing as the single best home mortgage.
These are some things you should consider before you decide:
1. Try to evaluate carefully your present financial situation and determine what your financial picture would look like over the next several years.
2. Research and do some in-depth study on the interest rates to get a sense of what and where you are heading. You can find more information if you read the Wall Street Journal, Barron's and some Sunday newspapers for they have comparative interest rates information for the last year.
3. Try to calculate and determine how much you will be putting down on your house and how much you can afford to pay every month.
4. Also, decide on how long you expect to be living in the house. If you are staying for only a few years look for ways to reduce your down payment and try to keep the closing costs and point as low as you can possibly let it be. If you are planning to live in the house for a long period of time it is would be best to get the lowest interest rates you can.
5. Try to be more familiar with the differences between mortgage choices that are available like fixed, adjustable rate (ARM) and balloon.
6. Choose what is most important to you now and in the long run. Whether you want having steady constant mortgage payment or paying the lowest initial rate with the possibility that your mortgage payment could increase.
These are some things you should consider before you decide:
1. Try to evaluate carefully your present financial situation and determine what your financial picture would look like over the next several years.
2. Research and do some in-depth study on the interest rates to get a sense of what and where you are heading. You can find more information if you read the Wall Street Journal, Barron's and some Sunday newspapers for they have comparative interest rates information for the last year.
3. Try to calculate and determine how much you will be putting down on your house and how much you can afford to pay every month.
4. Also, decide on how long you expect to be living in the house. If you are staying for only a few years look for ways to reduce your down payment and try to keep the closing costs and point as low as you can possibly let it be. If you are planning to live in the house for a long period of time it is would be best to get the lowest interest rates you can.
5. Try to be more familiar with the differences between mortgage choices that are available like fixed, adjustable rate (ARM) and balloon.
6. Choose what is most important to you now and in the long run. Whether you want having steady constant mortgage payment or paying the lowest initial rate with the possibility that your mortgage payment could increase.
images:
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M$
If you are buying the house to live in, the best mortgage is a fixed rate with a low interest because then you can easily plan around what it will cost you. If you plan to sell the home quickly, then an adjustable rate mortgage, graduated payment or interest only will suffice as long as you unload the house before the rate goes above your means.
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M$
I have to agree which mortgage is best for one person will be different for another. I recommend reading up on all your options as well as speaking to a community recommended lender/broker.
For some general examples..
A first time home buyer is likely going to fit best with a FHA loan or other guaranteed program for example here in Alaska we have the Alaska Finance Corporation. These types of loans have low down payments and lower interest rates which is usually the biggest home buying hurdle first time buyers face.
Someone who is buying a home for short term use may consider an ARM loan as they'll likely move before the interest rate has the chance to change.
A veteran will likely be happiest with a VA loan.
It really is very variable on circumstance. Even the home being purchased and the purchase price can affect which loan type would be best for an individual.
For some general examples..
A first time home buyer is likely going to fit best with a FHA loan or other guaranteed program for example here in Alaska we have the Alaska Finance Corporation. These types of loans have low down payments and lower interest rates which is usually the biggest home buying hurdle first time buyers face.
Someone who is buying a home for short term use may consider an ARM loan as they'll likely move before the interest rate has the chance to change.
A veteran will likely be happiest with a VA loan.
It really is very variable on circumstance. Even the home being purchased and the purchase price can affect which loan type would be best for an individual.
images:
You can leave an optional "tip" with Mahalo's virtual currency, Mahalo Dollars. If you are asking a difficult question that might require some research, or if you'd like a wide variety of feedback, a higher tip often leads to more answers to your question.
M$
This was a great answer, I would have chosen it anyway, but my computer died after bad storms, I've only just got sorted (I hope!) today. Thanks.