Choosing a Loan

Fixed-Rate Loans

You just purchased a home and plan on staying put for an extended period of time, basically forever. You’re buying when rates are low and don’t mind paying for 30 years, instead of 15. You are settled and are standing on solid ground. A fixed rate loan is the best loan for you.

A fixed-rate loan is a loan with a ‘fixed’ interest rate that will not change over the life of the loan, regardless of how the rates fluctuate in the open market. The most common fixed-rate loan is a 30-year loan, yet a 15-year fixed rate loan can offer lower rates, less interest and quicker home equity, albeit with higher payments.

By choosing a fixed rate loan you may enjoy lower monthly payments over the life of the loan, non-changing interest rates, protection from increasing rates and the ability to refinance if rates decrease.

Adjustable-Rate Loans

You are buying a home, interest rates are high and dropping, and you don’t expect to live in your new home for more than a few years. An adjustable-rate loan may be your best bet.

Adjustable-rate loans, also known as variable APR loans, allow you to pay changes according to a set rate formula as rates fluctuate in the open market. This usually equals to a larger loan for a given monthly payment, especially in the beginning. Adjustable-rate loans are terrific if rates drop, but your payments could far exceed what you would have paid for a fixed-rate loan, should rates increase.

With an adjustable rate loan you can possibly lower initial monthly payments or lower your payments over a short period of time. Payments may go down if rates improve, and you may qualify for higher loan amounts.

Interest Only Loans

Your income is mostly in the form of infrequent commissions or bonuses; you expect to earn a lot more in a few years; you would like to use your extra money to bank on investments that are sure to make money; Or, if you plan to sell the property in the short-term for profit and you’re looking for an alternative to traditional fixed rates, you may want to consider an interest only loan.

“Interest Only” loans allow you to make payments only on the interest accrued on your loan for a pre-determined period of time, say 5 or 7 years. Once the ‘interest only’ period is over, you can refinance, pay the balance in a lump sum, or start paying off the principal.

With an ‘interest only’ loan you may be able to get a larger, more expensive home with low initial monthly payments, and you may be able to secure a larger loan than with traditional fixed rate loans. Interest only loans are great for those who are looking for the lowest possible monthly payment, or those who are planning to move or refinance in a short period of time.

Reverse Mortgage Loans

You are age 62 or older and you plan to definitely stay in your home for a period of over five years. You need money to help pay for medical expenses, home improvements, or a trip to Tahiti. If this sounds like you, then a reverse mortgage is the best loan for you.

A reverse mortgage loan is a federally insured private loan for senior homeowners that enable those over the age of 62 to translate a portion of the equity of his or her home into cash. The most notable advantage to senior citizen reverse mortgages is that no repayment is required until the homeowner moves out for more than 12 months, decides to sell the residence, or passes away. Then the home is sold (or refinanced by the inheritors) to pay off the reverse mortgage, with the surplus equity proceeds going to the homeowner or the successors.

Home Equity Loans

You need a down payment on a car or house, need a new computer, are financing a business or education, or are consolidating your bills into one payment. You need a lump sum of money. You want the stability of a fixed monthly payment and are financially conservative. A home equity loan might be right for you.

Home equity loans, also refereed to as a second mortgage loan or a cash-out refinancing loan, are loans that are secured by the equity that you have built up in your home. (Equity is the difference between your home’s market value and the amount you owe on it.) Home equity loans are a smart way to obtain a lump sum of money to advance your lifestyle or make a major purchase.

Home equity loans have lower interest rates than consumer loans, are easier to obtain since the loan is backed by the equity of your home, are predictable and come with fixed payments that stay the same regardless of the swaying economy, and under most circumstances, home equity loans are tax deductible.

Home Equity Line of Credit

You need extra money for unexpected medical expenses, college funds, home improvements, new baby expenses, or any other life circumstance calling for extra funds. In this case, taking out a home equity line of credit may be an easy to way to obtain the funds that you need.

A home equity line is a type of revolving credit you can obtain by using your home as collateral. This type of loan uses your home similar to a credit card. The term is defined by a draw period that allows you to borrow money from the line and a repayment period that allows you to pay back the outstanding balance. The payment each month is based upon the outstanding balance owed. As payments are applied to principal, your available credit increases accordingly.

The interest rate you pay on the average home equity line of credit is generally lower than the interest rate you will pay on the average credit card or other type of non-secured debt, and for home equity lines of credit, you can generally deduct the interest you pay.

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This site is not a broker and does not collect or solicit mortgage applications. Content is for informational or comparison purposes only. Services are not available in New York. Products and services may not be available in all other states.

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