Archive for November, 2006

Interest Only Mortgage

In recent years interest only mortgages have become hugely popular across America. With property values increasingly dramatically in many cities, interest only mortgages have allowed many people to realize the American dream of homeownership.

How they Work

When you obtain a conventional amortized mortgage, part of your monthly mortgage payment goes to paying down the principal. But with an interest only mortgage you're not obligated to pay down the principal during the first term of the mortgage. You will have to pay interest and other attendant fees, such as mortgage insurance, homeowner's fees, inspection costs, and the like, but the principal balance will stay the same.

The first term of the interest only mortgage varies depending on your type of mortgage. But typically it will last for five or ten years. Once that term has expired the principal will be amortized for the remaining length of the mortgage.

Advantages and Risks

Interest only mortgages can be a great tool, especially for younger homebuyers. For many people their peak earning years are in their forties or fifties. So purchasing one's dream home via an interest only mortgage can enable younger homeowners to establish themselves fiscally and professionally. In the intervening time the homeowner can often use their mortgage interest payments as a tax deduction. And with the housing market's steady long-term climb the homeowner also has the benefit of accruing equity on their property.

The risks associated with interest only mortgages are almost exclusively tied to short-term economic fluctuations, particularly changes in the housing market. Without careful financial budgeting interest only mortgages can increase the chances of financial stress or foreclosure. But maintaining a healthy saving account or a diverse investment portfolio, and living within one's means, can significantly reduce these risks.

Obtaining an Interest Only Mortgage

For help with finding great loan offers for an interest-only mortgage, you can turn to America's Lending Partners. ALP is not a lending institution, but can connect homebuyers with a vetted network of interested and legitimate lenders. If you need guidance choosing the right mortgage you should also consider consulting with a Mortgage Planner, who can prepare a custom mortgage plan for you and guide you step-by-step through the mortgage application process.

Fixed Rate Mortgage

A fixed rate mortgage, also known as a FRM, is a popular mortgage vehicle that ties the borrower into a fixed interest rate over the life of the mortgage. Fixed rate mortgages are usually 30 years in length, although variants include 15, 20, 40 or even 50 year lengths.

Advantages and Risks

The overwhelming reason for the popularity of fixed rate mortgages is financial stability. Homeowners with a fixed rate mortgage typically see a minimal, if any, increase in their monthly mortgage payments. Any increases tend to arise from property tax or homeowner's insurance rate rises. But the core mortgage payment will not change. And thanks to the mortgage principal being amortized for the duration of the loan, at the end of the fixed rate mortgage's life the homeowner owns their property outright.

But fixed rate mortgages aren't for everyone. They often require a higher monthly payment because of the financial stability they bring. And homeowners who only intend on living in their home for several years might end up paying more than they need before they move on to a new property. Furthermore, if you obtain a fixed rate mortgage while interest rates are comparatively high, you must refinance to lock in a lower interest rate and clinch lower monthly payments.

Getting a Fixed Rate Mortgage

If you're interested in obtaining a fixed rate mortgage, consider the free, no obligation service provided by America's Lending Partners. ALP can match you with up to four trusted lenders. You can then evaluate their fixed rate mortgage offers and choose the one that's right for you.

If you're unsure whether a fixed rate mortgage is right for you, speak to one of ALP's experienced mortgage planners, who can help to evaluate your situation and provide you with a no obligation mortgage plan.

Jumbo Mortgage

A jumbo mortgage loan is a conventionally large loan which allows you to purchase big parcels of real estate or luxury homes.

Advantages and Risks

The definition of what qualifies as a jumbo mortgage loan varies from state to state. In the continental United States, a jumbo loan is approximately $415,000 for a single-family home. In Alaska and Hawaii, however, jumbo loans are around $625,000 for a single-family home. Prices for duplexes, three-unit, and four-unit homes also vary from state to state.

Jumbo mortgages can be critical for people who want to buy property that is too expensive to qualify for a conventional mortgage. In today's housing market that definition covers an ever-increasing percentage of homes. But approach jumbo mortgages with caution: they will place you under greater financial pressure. Not surprisingly, jumbo home loans are considered higher risk than conventional mortgages.

Obtaining a Jumbo Mortgage

If you're planning to take out a jumbo mortgage, it's crucial that you have a good long-term budget in place. Apart from the financial logistics, jumbo home loans require you have to have exceptionally good credit, which can take time to establish.

Make sure you work with an experienced mortgage professional to stay within your debt-to-income ratio. You may also want to begin storing up money to build up your net worth and knock down the principal in order to qualify for lower jumbo mortgage rates.

Whether you're looking to purchase a home or to refinance your existing home, you can employ America's Lending Partners to match you with up to four trusted lenders. You can evaluate the terms these lenders offer and thus come to a far more responsible decision about what's right for your budget. ALP's service is free and secure.

If you'd prefer more guidance with your mortgage application you should consider consulting a mortgage planner, who can provide the knowledge and honesty you'll need to obtain your jumbo mortgage.