Popular San Diego Mortgage Loans
Shopping for a home loan used to be like looking in the one-size-fits-all department. For years the standard residential mortgage was the thirty-year fixed loan. But these days there are are so many different options. Let’s have a look at a few.
The Fixed-Rate Mortgage Loan: This is where the old standard mentioned above falls in. But not all fixed-rate loans are amortized over 30 years. A fixed-rate loan can be found in 10, 15 or 30 year terms, although the thirty-year is the most common. The situation here is that the same interest rate is charged for the entire lifespan of the loan. There are no surprises. This type of loan is ideal for the borrower who plans to live in her home for a long time, and isn’t planning on moving up every few years.
The 10/1, 7/1, 5/1 and 3/1 ARM Loans: ARM stands for “adjustable rate mortgage.” This concept is fairly easy to understand by looking at the name of each loan. For example, the 10/1 ARM has a fixed interest rate for the first ten years of the loan. Starting the next year, the loan becomes adjustable every year based on a market index. The adjustment may either be upward or downward, depending on the current market conditions. So the 5/1 ARM has a fixed rate for five years, and then adjusts every year beginning with year six. These types of loans are good for people who are planning to live in their home for a shorter period of time than the fixed period of the loan. They will generally get a lower interest rate than on a fixed-period mortgage loan. The 5/1 and 3/1 ARMs are considered by some to be somewhat risky loans because of the relatively short fixed-rate period. If you find yourself in the market for one of these San Diego home loans, be sure to compare all four of them. I have seen times where the 10/1 has been cheaper than the 5/1!
The 1/1 ARM Loan: You guessed it. It adjusts every year. It’s very volatile.
The 5/5 and 3/3 ARM Loans: These are more stable versions of the adjustable-rate loans. Rather than adjusting every single year after the fixed period, they adjust every five and three years respectively.
The Balloon Mortgage: A balloon loan is taken out for a fixed period of time, offering a relatively low interest rate that remains constant throughout the life of the loan. The balance of the principal becomes due at the end of the loan term, which is commonly three, five or seven years. An advantage of a balloon loan is lower monthly payments that can allow that money to be used for other things. A disadvantage is that a borrower may have a hard time preparing for the large single payoff. It is common for a balloon loan to be refinanced before the note comes due. Balloon loans are very common on commercial real estate.
There are many different types of San Diego mortgage loans. In this article we covered a few of the more popular ones. A mortgage broker or mortgage banker who specializes in the San Diego mortgages will be be able to help you pick out a loan that is right for you. Just remember to always focus on the monthly payments, as they are what you will have to come up with on a monthly basis.
Other Topics of Interest:
Equity Mortgage: A home equity mortgage loan is a mortgage that places the home as the collateral, and allows the homeowner to easily borrow against the value of equity in their home.
Second Mortgages: Second mortgages provide a way for homeowners to access their equity and for home buyers to bridge the equity gap for their down payment.
Bad Credit Home Mortgage Refinance: Refinancing a mortgage can be a very daunting task for anyone. People with good credit can still find it scary, let alone those with bad credit, who may find it all but impossible. However, a bad credit home mortgage refinance is still possible.
No Cost Refinance Loan: The idea of what’s called a “no cost refinance loan” seems to be a very enticing. No cost usually means no payment, or no fees, but while this might be true to some extent, it is very important to know what no cost refinance loans really are.