What are the different types of mortgage loans?

Written by ICHBA
21
May

There are lots of mortgage loan types to choose from. Although it hasn’t always been like this. Newer and better loan packages have been developed to suit your housing needs. It is then left for you to determine which mortgage type is cheapest for you, the interest rate and fees that will favour you both in the long and short term. You are to identify the factors which will inform your choice for either a fixed or variable rate, and so on, and weigh the pros and cons of each.

Fixed rate mortgage

This mortgage type has fixed interest rates throughout the payment period. It is the most popular type of mortgage loan since the monthly payment will remain the same no matter any market factor. Therefore, if you choose a fixed rate mortgage loan type, you will have the security of what your interest rate will be for a very long time. It is advantageous since you can now get longer than the usual 5 year, 10 year or 15 year fixed rate mortgage loans. It is possible to now get up to 30 years and even 50years fixed rate mortgages. At Mortgage Savings Experts, you can find professional assistance to help determine which is suitable for you.

FHA Loans

these type of loans are insured by the government and are perfect for first time home buyers since the down payment required for them is significantly minimal. This is possible because the insurance provided by the government for this kind of loans removes all the risks that a lender will most likely face when the percentage put down by the buyer is below 20. It is more people friendly than the conventional mortgage loans since it is available to you even after declaring bankruptcy. All you have to wait through for an FHA loan is 1 or 2years after that and you can get the loan provided you maintain good credit since after foreclosure.

Tracker mortgage loans

Their interest rates are directly proportional to the base rate of bank of England. Therefore, if the base rate changes for whatever reason, your mortgage rate will also change. If you find a property and take a tracker mortgage with a rate that is 3% when the base rate of the bank is 1%, then you will pay an interest rate of 4%. It is popular because, like the fixed rate mortgage, it is available over a varying period of time like 5 years, 10 years, 15 years, and so on.

VA Loans

Like the FHA loans, this type is government issued but for veterans and their family members. The US department of Veterans Affairs will reimburse any lender if there is any kind of loss that may arise as a result of the buyer’s doing. It should be noted that the government, for both VA and FHA mortgage, does not directly provide loans but only insure them. The programme powering this loan ensures that the eligible candidates are provided with 100% assistance in buying homes.