Here you get information about the different types of mortgage plans, some crucial points that you must know before you sign a mortgage agreement with the lender, all other important information about loans and latest Dutch news regarding mortgage and loans. Read on.
Placing a mortgage as a security against debt is transferring certain rights on a property to a lender; to be executed in case of violation of mutual debt agreement between the two, or to be returned intact in case of fulfillment of the agreement without a breach.
The mortgage agreements need to be based on legal mortgage terms and conditions prevailing in the state and must safeguard rights of both the parties in all possible circumstances.
If you are planning to buy a house by borrowing money from a financial institution, banks or an individual, you will have to sign a mortgage agreement with the lender. There is a limit on how much you can borrow; the basic rule is that your annual repayment should not exceed 30% of your gross annual income.
Depending upon the nature of your deal, your social status, your financial status viz. earning potential, loan tenure, interest rates etc., there are few different types of mortgage plans that you can choose from:
Types of Mortgages:
1) Fixed Rate Mortgage: A fix payments of principal and interest is repaid on monthly basis unto a fixed length of tenure. The repayment tenure can be anything like 10, 15, 20 or even 30 years. In fix rate mortgage plans interest is front loaded and a big part of your monthly payment goes into paying interest only. Fix rate mortgage plan is ideal for people with limited or fix monthly income or salaried persons who intend to use the property on long term basis.
2) The Adjustable Rate Mortgage (ARM)
It is a combination of fixed rate mortgage and a floating rate mortgage. The mortgage interest rate is fixed for certain periods than it becomes adjustable. People choose the adjustable rate mortgage plan when current mortgage interest rates are high.
3) Interest Only Mortgage: Under this mortgage you opt to pay only interest amount at the beginning of the loan. Interest only loan mortgage periods might range from 1 year to anything upto half the term of the mortgage loan. After the interest only payment is over, you will begin making payments on your mortgage principal.
4) Biweekly Mortgage: Under this type of mortgage plan you pay half of what your monthly mortgage payment would be. You will be required to pay 26 (not 24) biweekly mortgage installments.
5) Two Step Mortgage: This can be a long term, say up to 30 years, mortgage with special features: convertible or non-convertible. These mortgage loans have a fixed interest rate for the first five years and then switches to either a 25 year fixed mortgage rate or adjustable mortgage rate.
6) Federal Housing Authority (FHA) Mortgage: This is a loan insured by FHA that is part of the U. S. Department of Housing and Urban Development (HUD). FHA loans require lower mortgage down payments and are easier to qualify than conventional loans.
7) Veterans Affairs Loan: This is a mortgage loan for veterans and service persons, supported by guarantee of U. S. Department of Veterans Affairs. This guarantee allows veterans to avail loans with good borrowing terms, usually with little or no down payment.
Whatever mortgage plan you may qualify and opt for, your loan documents contain the terms of your loan. You should review them carefully before closing on your loan. Your loan and mortgage documents should accurately reflect the terms promised by your lender. Besides, there are certain things that you should ask to your lender before signing an agreement:
1. Which is the lowest interest plan for me?
2. Will my interest rate be fixed or variable?
3. If changeable, when and what?
4. In case of an introductory or “teaser” rate, when will it change and how?
5. What is the best offer I can get if I go for a standard full-documentation loan rather than a low-doc or no-doc loan?
You should also know about the following things about your mortgage plan:
1. What is Annual Percentage Rate (APR)?
2. What is Adjustable Rate Mortgage (ARM) Disclosure?
3. What is Good Faith Estimate (GFE)?
4. What is Initial Truth in Lending (TIL) Disclosure?
5. What is Reduced Documentation Loan?
6. What is Teaser Rate?
To avoid any misconception at a later stage, it is important that you understand all the involved terms, associated benefits and risks factors prior to choosing any mortgage plan. In any case, make sure that the repayment terms suite your ability to repay the debt.
Source: http://www.ArticlePros.com/author.php?Karel Mensmans
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