In our last installment on mortgage options we discussed three popular options including the thirty and fifteen year fixed rate mortgages and adjustable rate mortgages. Throughout this installment we will look into other popular options homeowners have when looking into financing a home.
Interest only mortgages can be either fixed or adjustable rate and offer homeowners the option to pay only the interest on their mortgage for a specific term between five to ten years. The loan is set up in a manner in which you can pay the interest only or interest and principle until the end of the interest only period. The risk of this type of loan option is that if the value of your home does not appreciate as you may expect when you decide to refinance your options could be limited.
If you are unable to refinance at the end of the interest only period you could be stuck with an incredibly high mortgage payment. Interest only loans offer a flexible payment option that allows you to buy more home than what you may be able to afford when you are initially buying. This makes a lot of sense for homeowners who know that they will be making more income in the future and therefore will be able to handle the higher payment.
Another option homeowners have when it comes to obtaining a mortgage is the flex pay payment option. With this type of mortgage the homeowner has the ability to pay a different amount each month. The monthly payment can include a low payment option, an interest only payment option and an interest plus principle option. This option is great for those homeowners without a steady income. It is incredibly flexible month to month. The major risk with this type of loan is that if you only pay the interest payment option and the home does not appreciate homeowners may find themselves owing more on their home than it is worth.
A balloon mortgage is a fixed short term mortgage that follows an amortization schedule similar to traditional fixed term mortgages. The terms of a balloon mortgage are three, five or seven years in which you pay interest and mortgage. At the end of the balloon term you need to come up with a manner in which to pay off the home, most often this comes from refinancing. The one drawback is if the interest rates at the end of the balloon period are high you will not have an option to wait until rates are better to refinance. This means that homeowners could be stuck with a higher than average mortgage payment.
It is important to sit down with a mortgage broker to discuss available options. Homeowners all have different financial situations and different monthly needs.
Cross Country Mortgage in Brighton, Michigan provide mortgage services for clients including new home loans, refinancing, reversed mortgages, new purchase home mortgages and home equity loans to the entire Livingston County area including Brighton, Howell and Livingston County. Cross Country Mortgage Brighton, MI at http://brightoncrosscountry.com/.
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