When financing a house, it is always a good idea to know the different types of mortgages that are available to you. Below is a handy guide to the different types of mortgages that are accessible to all homeowners.
One year adjustable rate mortgages – This type of mortgage loan is a loan in which the interest rate changes based on a specific schedule after a fixed period at the beginning of the loan.
Fixed rate mortgages – When the interest rate remains the same throughout the entire life of the loan, then the homeowner has opted for a fixed rate mortgage. A more popular mortgage loan option, this particular loan comes in terms of 10, 15, or 30, years.
2-step mortgages – A 2-step mortgage is an adjustable rate mortgage, however, this loan will have the same interest rate for a portion of the mortgage, and then a different rate for the reminder of the mortgage.
10/1 adjustable rate mortgages – For this type of loan the initial interest rate is fixed for the first 10 years of the loan, after, the rate then adjusts each year for the reminder of the loan. The shelf life of this loan is 30 years.
5/5 and 5/1 adjustable rate mortgages – The monthly payment and interest rate of these types of mortgages does not change for 5 years. At the beginning of the 6th year is when the interest rate is adjusted for every 5 years that the homeowner has the mortgage.
3/3 and 3/1 adjustable rate mortgages – The interest rate for these particular loans, remain the same for 3 years. At the start of the 4th year, that is when the interest rate will be adjusted every 3 years.
5/25 mortgages – Also known as the “30 due in 5” mortgage loan, this particular type of mortgage has a monthly payment and interest rate that does not change for 5 years. When the 6th year starts, the interest rate is adjusted according to the current interest rates.
Balloon Mortgages – Working a lot like a fixed-rate mortgage, the monthly payments are lower because of the large balloon payment due at the end of the loan, and the interest rates are mainly being paid monthly.
This information was brought to you by Matt Crane, a leading specialist in Miami Beach Luxury Real Estate. To learn more about the exclusive Miami Beach Homes for Sale, contact the expert in single-family homes and high-end condos, Matt Crane, at (305) 203-0000.