Washington
Real Estate Mortgage Loans
A mortgage is a document signed by a borrower when
a home loan is made that gives the lender the right
to take possession of the property if the borrower fails
to pay off the loan.
If you are a first time home buyer or have purchased
many homes, the type of mortgage you select is very
important in the State of Washington.
Listed below are the many types of mortgage loans
available to the home buying consumer. There are many
types of home mortgage loans within Washington to select
from with lots of different offers and home mortgage
loan application decisions. In the past the most common
mortgage types were a 25, 29 or 30-year fixed interest
rate home mortgage loan. Now, there are so many different
options well targeted toward borrowers and individuals
within Washington, in different financial situations
within the state of Washington.
ARM (Adjustable Rate Mortgage
Loans)
If you are only going to be living in your home for
a few years an Adjustable Rate Mortgage is the best.
An adjustable rate mortgage is also referred to by the
acronym "ARM". ARMS's have a set interest
rate and steady monthly payment for a number of years.
The mortgage loan payment is usually based on the amount
to payoff the entire mortgage balance at the end of
the term, which is usually 30 yrs.
The most common types of ARMS are 1 yr, 3/1 yr, 5/1
yr and 7/1 yr ARM, After the initial period is over,
the rate and term of the mortgage will be adjusted annually
to current market mortgage rate if you do not refinance
the loan. Most ARMs have caps on how much the interest
rate may increase after the loan expires. ARMS are very
popular because the rates are usually about 2-3% lower
that a fixed rate which means lower payments. The less
number of years usually means the lower interest rate.
A 1 yr ARM will have a lower interest rate than a 5/1
year term. ARM.
Fixed Rate Mortgage Loan
If you know that you are going to be in the house for
a number of years then a fixed rate mortgage is best.
A fixed rate mortgage is the most common home finance
method and usually are 15 yr or 30 yr mortgage loan.
A fixed rate mortgage loan is good if you know you will
be living in your home for a long time and you don't
have to worry about your payment ever increasing. Monthly
loan payments will be the same for the entire life of
the loan. The first payment will be the same as the
last payment.
If home mortgage interest rates increase you have an
advantage because your loan interest rate is locked-in
at a lower rate which means your mortgage loan payment
will not increase. But alternatively if interest rates
drop your rate will not go down unless you refinance
your mortgage. Rates went up to 18% at one time and
as low as 4% recently so it is hard to tell what will
happen in the future.
A 15 year home mortgage will have a somewhat lower
interest rate but higher monthly payments than a 30
year fixed mortgage rate. The advantages to this type
of mortgage financing is that you will get more home-equity
by paying down the principal balance. You also will
have the loan paid off faster and will not have paid
as much total interest when the loan ends. It could
save you $100,000 or more in interest.
A 30 or 25 year year home mortgage loan will usually
have a higher interest rate than a 15 year and a lower
payment. This is a good type of loan to get if you are
short on money or cannot qualify for the higher mortgage
payment. If you start to make more money and want to
pay off the mortgage balance faster you can always set
up bi-weekly payments with your lender. You also can
just pay more money every month and apply it to the
principle balance. Mortgage lenders rarely impose a
penalty for this.
Interest-only mortgages
An interest only mortgage is where the borrower only
pays the interest on the loan each month. This means
property debt never declines. Many borrowers get this
type of loan because the rates are real low and the
payment is low. An interest-only mortgage may be good
if you expect to earn a lot more in a few years and
know you will be able to afford a higher mortgage payment
later on where you can always refi your loan. Washington
homeowners may choose interest only mortgages because
they are going to invest funds and make money on the
savings on the difference between an interest-only mortgage
and a regular amortizing house mortgage loan with principle
and interest.
You should always shop around many different lenders
for the best deal because it could save you thousands.
Make sure you have in writing all the fees and points
that the lender is going to be charging you before you
decide. The mortgage lenders want your business and
their rates and terms are always negotiable. |
