There are a lot of folks who would love to buy a home as it is a financial asset par excellence. Owning a house provides the opportunity to conserve your money in the form of equity unlike the money used for rent payments. While earning equity is fine, similar to paying rent, mortgage loans also require you to manage your costs in terms of the monthly payments you make.

When you take a mortgage, the house (or in some cases the Phoenix investment properties) is held by the lender as a collateral. The borrower is supposed to make regular payments on the mortgage and if there is any default on the payments, the house could go on foreclosure. Here are some details about the kinds of mortgage loans that you can take advantage of:

  1. Fixed Rate Mortgage Loan: The interest rate on these loans is fixed and hence it remains constant over the full tenure of the loan. It is quite stable and also less risky, as the borrower has perfect visibility on the payments to be made over the loan period.
  2. ARM (Adjustable Rate Mortgage): In such loans, the interest rate is pegged to prevalent market rates. While the interest rate for the initial period could be fixed, the rate become free floating thereafter. This also makes these loans a bit risky as it is tough to project market rates. Many investors holding Charlotte investment property in their portfolios got burned by these loans.
  3. Balloon Mortgages: In this type of loan, the borrower pays a small monthly installment for a certain period, after which the loan balance is paid off in a single lump sum or balloon payment.
  4. Home Equity Mortgage Loans: This is a kind of loan ,where you can get cash against the equity on the home that you have purchased. The loan amount can get cleared off in fixed or variable rates.
  5. Government Home Mortgage Loans:
    1. FHA Home Mortgage: This is a kind of government home mortgage loan where loan is extended to certain people that fulfill a few pre-specified criteria. In this case, the borrower can pay only 3-5% of the price of the house and get loans at easy rates.
    2. VA home mortgages: These are home loans that are given to war veterans and government employees. There may be a requirement of 0 down payment and the tenure of the loan could be quite extended, as well.
    3. Rural Housing Services Loans: These loans are extended by the government in rural areas, where borrowers may not need to make any down payment at all.

Taking a home mortgage loan is quite a big financial decision. Most finance companies will give you loans based on your gross income. But when you make payments, you have to do so from your post-tax or net income. This is why it is very important to make sure that you have the financial and monetary capability to pay back the loan, by considering your income as well as expense statements, including tax liability.

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