Homeowners considering the lowest payment only could be risking their financial future. Finding the best home mortgage loan is like picking the best product with any of your other purchases; there are just too many choices. You are bombarded with advertising: low rates! Zero Percent Interest! Extremely low introductory interest rates! However the risk is much greater when it comes to your house than it is with the latest electronic device. Knowing that your financial well being is at stake if you choose the wrong mortgage and fall behind on your mortgage payments should be enough to motivate you to do your research before charging in. That’s where collecting all the information available to you is in your best interest; information found in the book offered by this site.
Some people are racing to get into their first home, to upgrade to a more expensive area, or to even purchase an additonal home, and they don’t take the time to do their homework; this can be extremely costly and risky. People just don’t look before they jump into loan offers these days. All they want is the lowest monthly payment. The less homework you do, the easier it is for you to be taken advantage of. Loads of people are duped into loans that are not in their best interest every year. There are many different types of loans you should be familiar with.
1. Option Adjustable Rate Mortgage Loans: Payment Option ARMs, are a hot item these days. This type of loan gives homeowners several payment choices every month, including how much interest they will pay; you can choose to pay less than the interest due. If you decide to pay less than the amount of interest due with an option loan, you face what lenders call negative amortization which causes you to owe more every month than you borrowed. Should you decide to sell your home, you may owe more than your home is worth.
2. Interest Only Mortgage Loans: These mortgage loans require interest payments on the money borrowed and not the principal amount of the loan. Your monthly payment is much lower during the interest only portion of the loan; however, they rise sharply when you start paying off the principal amount. Your interest rate will change with market rates so you could find another surprise in your interest only payments.
3. Traditional Forty Year Mortgage Loans: Mortgage that draw repayment out over forty years; these loans often offer a fixed interest rate, and are still very popular. Forty-year mortgages have been around for years but drew little attention. A recent survey says that this type of loan accounts for only 1-2 percent of mortgage loans written today.
Beware the new types of mortgage loans being introduced today. Homeowners may not read the fine print and do not understand how much they will have to pay or may be purchasing a house they can not afford. Some of these new loans have low initial payments and then balloon up to much larger payments down the road.
To learn more about choosing the right type of mortgage loan sign up for our free course: “Five Things You Need to Know Before Refinancing a Mortgage” using the link below.