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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!!

Loan modification is the process of permanently changing one or more terms and conditions in the home loan so that the new modified loan is affordable to the debtor.

Let’s discuss few basic characteristics of Loan modification which will open up your understanding of loan modification.

• Loan modification does not involve any charges to the borrower; Federal laws mandate the lender companies to not avail any kind of administrative or late charges for loan modifications.
• To qualify for the loan modification, it is important to remember for you and your lender that you will now be able to make payments of your loan which will be lower than your current monthly mortgage payment. You will need to provide with your income proof, bank statements detailing your income and expenses and thus providing a justification that if you are offered loan modification, you will be able to afford the new monthly loan payment.
• The acceptable reasons which are considered by the lending companies for loan modifications are separation with the co-borrower, death of co-borrower, job relocation, military service, loss of job and subsequently the income. It is advisable to present a genuine and effective letter to request for loan modification along with the application.
• With loan modification program, you can stop foreclosure and also the missed payment of your current loan can be added to the modified loan and will be spread over the entire loan term to make it affordable for you.
• If currently, you are delinquent, it is possible that your bank may contact you for the possibility of loan modification as they are paid bonus by the federal government to help the borrowers preventing from falling under the defaulters.

It is suggested to carefully read the terms and conditions for loan modification, get all your details, know your legal rights and then approach for the loan modification program.

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.

A Home Equity Loan, which is also abbreviated as HEL, is a type of loan in which a borrower uses equity in their home as a collateral. HEL is generally availed for the expenses such as home renovations, schooling, paying off other debts, medical bills or college education. Home Equity loan is also known as second mortgage since it is secured against the value of property.

The primary features of Home Equity Loans are as follows:

• Home Equity Loans are approved faster since you use your home as a collateral and the lender can get control of your home if you fail to pay off the debt.
• Home Equity loans have fixed rate of interest.
• The monthly instalments to be paid in Home Equity Loans are less as compared to the primary mortgage.
• The interest amount is tax deductible.

One should be aware while going for Home Equity Loan is that HEL is not a free money and its home which is backing the loan, it is therefore suggested to use HEL very wisely. Try and avoid any missed payments as it may increase the chances for lender to take possession of your home.

HEL has fixed interest rates and therefore you will receive a lumpsum amount of money, it is therefore suggested to use home equity loan for the one shot expenses such as buying a car, home repair etc.

The loan amount you can apply for largely depends upon the factors such as income, debts, the value of your home, how much you still owe on your mortgage and your credit history.