Talking about refinance real estate loan, there are options galore. As a matter of fact the abundance and choice of financing options available to home buyers has never been as good as it is at the moment. Theoretically speaking, there are loans to suit every individuals requirements and for any type of homes. It is worth mentioning in this regard that the flexibility is such that virtually anyone is capable of securing a loan for purchasing or building a house. Whatever be your requirement, it is worth pointing that there are customized financial packages available to give you the best offer. If experts are to be believed, one could seek to secure anything from a traditional mortgage loan to the adjustable rate loans or hybrid loans.
Always remember that every loan applicant makes a loan choice based on two vital factors, first one being his current financial situation and the second one being the future plans that he has. Though there is no denying that the market is flooded with a wide array of loans on offer, and that too each being more tempting than the other. First and foremost, its pivotal that you get the list of loan home options available. Furthermore, when actually planning to secure a loan you must seek the advice of an expert who can suggest the right type of loan to meet your situation.
Below is some information on the various types of loan home and what each of these means. Take into note that the first set of options is based on the interest rate involved.
Fixed rate loans: As is quite evident with the name, these are mortgage loans in which the rate of interest remains constant throughout the time length of the loan. This in turn leads to a fixed monthly payment throughout, and that is one reason they were the most preferred type, by home owners, in the past. Furthermore, the fixed monthly payment allowed easy panning and budgeting to the home owners. The other benefit is that this type works in isolation from the inflation rate, so when the inflation rate moves upward the homeowner will not have to pay bigger monthly installments. It is worth noting that the term of these loans can be anything between 15 years to 40 years, but whatever be the term it is mostly a multiple of five.
Adjustable rate loans: In simple terms, these are mortgage loans in which the interest rates are not constant rather they are subject to change over the period of the loan. Fact remains that fluctuation in the rate of interest arises due to these loans being attached to some index such as treasury securities, and as there are changes in the index the interest rate to moves in accordance. Furthermore, there could be times when these indexes may show dramatic increments, so to avoid the interest rates too from acting parallel caps are set up. Always remember that these caps limit the interest rate from rising beyond a certain level within each year as also through out the entire life of the loan. In an ideal scenario, the caps are set at 2 percent and 6 percent, for the year and the full term respectively. In addition, these protective measures and the introductory interest rates being low are the two substantial reasons why home owners are showing an increased interest in this type of loans.
Hybrid loans: Hybrid loans on the other hand are a mixture of the above-mentioned fixed rate and adjustable rate home mortgage loans. In theory, for the initial period the loan is on a fixed rate basis and after a point of time it is converted into an adjustable rate home loan. For the home owner it is highly advisable that he finds out how much increase in the rate will take place after the conversion, from the lender.
This becomes even more pivotal under the light of the fact that quite a few hybrid loans may not have any interest rate caps, more so for the first period of adjustment. Moreover, the other possibility under hybrid loans is that the loan may start on a fixed interest rate for the initial few years and then after a point will be converted to another fixed rate loan, but with a higher rate of interest for the remaining period. More often than not the introductory rates in the hybrid loans are low. And homeowners, who are interested in availing the stability offered by fixed rate loans, opt for hybrid loans, especially when they have no plans to stay in the house for a long time.
Below is another list of the few types of loans; this categorization is not based on the interest rates.
Balloon payment loans: Balloon payment loans are loans where a major sum of amount is to be paid at the end of the loan term. Furthermore, the loan may be for a shorter term and the payments are calculated on the basis of a long term, to simplify this statement let us assume that the loan is to be paid within 10 years but the homeowner takes a fixed rate loan based on a 25 year term. Thats why the homeowner will make normal payments for the ten years and then make one consolidated payment for the balance amount.
FHA and VA loans: These types of loan home programs offered by the government of US to help people secure home loans who normally would not be able to make use of the conventional loans. It is worth pointing that these loans have low qualifying ratios and the homeowner can buy a house with no or very little down payment. In addition, both Federal Housing Authority and Department of Veteran affairs are not loan providers, all they do is insure the loan amount that the homeowner takes from an outside lender. Theoretically speaking, FHA loans can be availed by any US citizen, but VA loans are meant only for veterans, their spouses and some government employees.
Always remember that every loan applicant makes a loan choice based on two vital factors, first one being his current financial situation and the second one being the future plans that he has. Though there is no denying that the market is flooded with a wide array of loans on offer, and that too each being more tempting than the other. First and foremost, its pivotal that you get the list of loan home options available. Furthermore, when actually planning to secure a loan you must seek the advice of an expert who can suggest the right type of loan to meet your situation.
Below is some information on the various types of loan home and what each of these means. Take into note that the first set of options is based on the interest rate involved.
Fixed rate loans: As is quite evident with the name, these are mortgage loans in which the rate of interest remains constant throughout the time length of the loan. This in turn leads to a fixed monthly payment throughout, and that is one reason they were the most preferred type, by home owners, in the past. Furthermore, the fixed monthly payment allowed easy panning and budgeting to the home owners. The other benefit is that this type works in isolation from the inflation rate, so when the inflation rate moves upward the homeowner will not have to pay bigger monthly installments. It is worth noting that the term of these loans can be anything between 15 years to 40 years, but whatever be the term it is mostly a multiple of five.
Adjustable rate loans: In simple terms, these are mortgage loans in which the interest rates are not constant rather they are subject to change over the period of the loan. Fact remains that fluctuation in the rate of interest arises due to these loans being attached to some index such as treasury securities, and as there are changes in the index the interest rate to moves in accordance. Furthermore, there could be times when these indexes may show dramatic increments, so to avoid the interest rates too from acting parallel caps are set up. Always remember that these caps limit the interest rate from rising beyond a certain level within each year as also through out the entire life of the loan. In an ideal scenario, the caps are set at 2 percent and 6 percent, for the year and the full term respectively. In addition, these protective measures and the introductory interest rates being low are the two substantial reasons why home owners are showing an increased interest in this type of loans.
Hybrid loans: Hybrid loans on the other hand are a mixture of the above-mentioned fixed rate and adjustable rate home mortgage loans. In theory, for the initial period the loan is on a fixed rate basis and after a point of time it is converted into an adjustable rate home loan. For the home owner it is highly advisable that he finds out how much increase in the rate will take place after the conversion, from the lender.
This becomes even more pivotal under the light of the fact that quite a few hybrid loans may not have any interest rate caps, more so for the first period of adjustment. Moreover, the other possibility under hybrid loans is that the loan may start on a fixed interest rate for the initial few years and then after a point will be converted to another fixed rate loan, but with a higher rate of interest for the remaining period. More often than not the introductory rates in the hybrid loans are low. And homeowners, who are interested in availing the stability offered by fixed rate loans, opt for hybrid loans, especially when they have no plans to stay in the house for a long time.
Below is another list of the few types of loans; this categorization is not based on the interest rates.
Balloon payment loans: Balloon payment loans are loans where a major sum of amount is to be paid at the end of the loan term. Furthermore, the loan may be for a shorter term and the payments are calculated on the basis of a long term, to simplify this statement let us assume that the loan is to be paid within 10 years but the homeowner takes a fixed rate loan based on a 25 year term. Thats why the homeowner will make normal payments for the ten years and then make one consolidated payment for the balance amount.
FHA and VA loans: These types of loan home programs offered by the government of US to help people secure home loans who normally would not be able to make use of the conventional loans. It is worth pointing that these loans have low qualifying ratios and the homeowner can buy a house with no or very little down payment. In addition, both Federal Housing Authority and Department of Veteran affairs are not loan providers, all they do is insure the loan amount that the homeowner takes from an outside lender. Theoretically speaking, FHA loans can be availed by any US citizen, but VA loans are meant only for veterans, their spouses and some government employees.
