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To choose and purchase a house is no doubt a tedious task, it however becomes difficult to choose a type of mortgage loan after the home selection is done. The loan applicant needs to take into consideration regarding the type of loan to be finalized. We always want to enjoy lower interest rate on any type of mortgage loan. We have discussed various types of mortgage loans here for your ease.

Fixed rate mortgage loan: With the fixed rate mortgage loan, you may or may not enjoy lower interest rates since with fixed rate mortgage loan, interest rate will be same all over the period irrespective of the market position as it was while the loan was originated.

Variable rate loan: With variable rate mortgage loan, interest rates will fluctuate over the period of loan, if the prime rate of interest falls below the prime rate of interest, home owner will enjoy lower interest rate and thus can save more, however if it rises above the prime rate of interest, the homeowner has to bear cost with higher interest rate.

A capped loan allows home owner to enjoy lower interest rate than a prime rate of interest if available and also the rate of interest will not rise above the particular limit. Another loan is where a homeowner takes out a mortgage for a variable interest rate loan. While the interest rate will fluctuate in accordance with the current prime, the interest rate the consumer pays will always remain a certain number of points below whatever the current prime rate is.

Homeowner also needs to decide on a 15 year mortgage or 30 year mortgage which ever suits according to the requirement, both of which have its advantages and disadvantages which will be discussed in the following post.

Till then, have a nice time!!

Refinancing house mortgage loan is a common practice today; it is even a better option in case of urgent cash requirement such as medical emergency or educational fees. Refinancing can help you alter your mortgage payments so that with the same amount of earning, you can pay off low monthly mortgage payment. It is however advisable to properly weigh the gains and losses while going for refinancing house mortgage loans. I have discussed common types of refinancing options available with their benefits and shortcomings

Debt Consolidation refinancing:

If you are in a serious debt which is costing you more than the home mortgage debt, the best option available to you is to refinance your home mortgage by debt consolidation. This will decrease the monthly amount to be paid and will help you save money in hand for other emergency expenses. The major drawback of this loan is that since you are aware that the monthly payment is low, you tend to become lenient with your expenses leaving an open chance to again getting you trapped in loan cycle.

Home Equity refinancing:

Home Equity refinancing loan is available by making use of equity of the house; the loan will be available on the amount which is not owned by you. For example if the total cost of your house is $300,000 and you owe $100,000 cost of the house, the refinancing will be carried out on $300,000 minus $100, 000= $200,000 to meet your emergency cash needs. The short coming is that you if you are not able to repay this loan, serious consequences such foreclosure of your home can be faced.  Also it is advisable to get the proper estimate of your property and the real estate process in your area before availing this type of services in order to ensure that you are not under any kind of loss.

Extreme vigilance and carefulness is advised while availing for any of the home mortgage refinancing options.

Foreclosure is the legal proceedings carried out by the creditor in order to repossess the collateral for loan which is in default. Foreclosures are never welcomed, here are some tips which can help you avoid or delay the foreclosure of your property.

Do not avoid your bank:

You will receive number of calls from your lender regarding the late payment or missed payment, it is advisable to not avoid these calls and discuss with your lender about the economic problem you are facing.

Try to set up Forbearance:

Forbearance is an agreement which is set up between your creditor and you stating that your creditor will not take any action against you for a set period of time say 2-3 months when you do not pay the loan instalment. This will give you some time to search for an alternative for the repayment of the loan.

Look for option to rent your property:

You can rent the property you own, if the mortgage payment is low and the rental payment can cover the mortgage payment.

Make your spending systematic:

Try to avoid unnecessary expenses so that you do not run out of cash for the mortgage payment. Prioritize the spending and you can determine the money available to you for spending and saving for the mortgage payments.

Modify your loan:

Talk to your lender and try to modify the terms and conditions of your loan by which you can get some time to look for the money to be paid to the lender. You can also look for the situation wherein the monthly mortgage payment can be reduced.

Buying a Home is daunting and a big life experience. Mortgages forms an important part of home buying process, however many of us are confused with the type of mortgage to opt for and due to lack of basic difference in these types of mortgages we land up applying for unsuitable type of mortgage.

Here mentioned is the list of mortgages with the basic difference so that you are not mistaken with your decision of choosing  mortgage.

Fixed Rate Mortgage Loans:

This mortgage provides the same interest throughout the loan period which means that even if the interest rates goes up during your loan tenure, your interest rate remains unchanged, this is the biggest benefir offered by fixed rate mortgages, however the disadvantage is that in case the inetrest rate is lowered during your loan tenure the intererst rate for your loan is same, But this can be overcome by refinancing your home at lower rate and enjoying the benefits. Fixed rate mortages are available for 10, 20 or 30 years.

Adjustable Rate Mortgage (ARM)

The adjustable rate mortgage provides fixed interest rates initially with initial monthly payment. However after some time depending upon the market conditions, the loan is subjected to change and so the interest rates. If you plan to stay in new purchased home just for some time, then Adjustable rate mortgage proves beneficial to you such that you can sell the home before the fixed rate period expires and also enjoy the lower interest rates.

Balloon Loan

Balloon loans are short term loans with the fixed rate of interest, The payments to be made initially in the Balloon loans are small, generally for the introductory period, this introductory period can be 5 years, 7 years or 10 years, after which you are required to refinance or payoff the remaining balance with the lump sum amount which is also called as balloon payment.

Government Loans (FHA, VA, RHS)

FHA Loan – Federal Housing Administration issues this loan and is open to all qualified homebuyers. FHA loans offer low down payment of upto 3 to 5 percent.

VA Loan - Department of Veterans Affairs insures a long-term, less or even no-down-payment loan. Because the VA insures this loan, it has the added benefit of zero down payments. This type of loan is only available to qualified military veterans who have obtained a certificate of eligibility from the Department of Veterans Affairs.

RHS Loan - The Rural Housing Service (RHS) loan offers low interest rates with no down payment. It is available to households with low to moderate income located in rural areas or small towns.

Hope you are clear with fundamentals of mortgages, so relax and enjoy your home buying experience.

Seniors are living more that they have anticipated. In such cases for retirees who have their own home, reverse mortgage looks a better option to generate some cash. However there are other options also available instead of going for reverse mortgage.

A reverse mortgage also called as lifetime mortgage is a loan available to seniors against their own house, and is used to release the home equity in the property as one lump sum or multiple payments. The repayment of this loan is not required until the mortgage passes away or shifted to another place an aged care home for examples.

As quoted by Thomas Holland, partner at Global Vision Advisors, reverse mortgage loans are only qualified by the seniors who are more than 62 years of age and also owns atleast 65% of the house. The higher the age of the co-owner of the home, higher will the amount of reverse mortgage loan. And once a reverse mortgage is taken out, it increases the person's income, which may have a negative impact on Medicare nursing home payments, Holland says.

Another option suggested by Andy Firoved, chief executive officer of Homeowners Toolbox is to sell the home and move to a smaller place or to an assisted living facility.

A creative solution as suggested by Dan Deighan, founder of Deighan Financial Advisors is to sell your home to your kids. In this way you ensure that the house is with the family after the elders have passed away.

Senior citizens can also look into asking their families for help before getting a reverse mortgage. Bryan Hopkins, president of Hopkins Wealth Management, says He also urges soon-to-be retirees to revisit their retirement plans to explore other options.

Source: http://www.forbes.com/