Reviewing Nontraditional Home Loan Options
Gone are the days of the standard 30 year mortgage with a fixed interest rate. People today have different situations, be it non-perfect credit, inability to make a down payment, or being a first time homeowner. Things have changed and there are options available for anyone wanting to purchase a house. The first option in loans is a 40-year loan. It is similar to the standard 30-year loan, but has an extra ten years for the payoff. This extension comes at the cost of an average half point higher in interest rate. This is a good option for having longer terms, and lower payments, at the trade off of paying more in the long run. Another option is the portable mortgage loan. This loan was introduced by E*Trade in 2003, and gives the option for transferring the mortgage from one house to another in the event of moving. Additional loans are available to help cover any additional costs. This loan is good for those who are buying a house, but have plans to move in the near term (5 years or so). The disadvantage for these types of loans is a higher interest rate on the portable loan as well as on the secondary loan after moving. The interest only loan is another type of home loan. This loan only requires the payment of the interest on the loan during a set term, such as the first ten years. After this period, the loan basically becomes a new mortgage over twenty years with its own interest and principal payments. This allows for a lower payment during the interest only period, and these payments are tax deductible. The disadvantage is if the housing market stagnates, this can cause negative equities if there has not been enough paid on the principal. Another to consider is after the interest only period, the payments can jump greatly. The piggyback mortgage is another non-traditional home loan. This loan is actually two separate loans in an 80-10-10 set up. This means that the homebuyer raises 10 percent of the amount, and then takes out two loans. The first one is for 80 percent of the amount, and then the second loan covers the other 10 percent with a slightly higher interest rate. This loan can have downsides due to the higher interest on the second loan, which depends on the buyers credit score. Loans have come a far way since the days of the basic home mortgage loans of days past. The market has changed to one that encourages first time homebuyers, and gives many options to buyers to ensure that the most people possible can get into a home of their own. Speaking to a mortgage company or bank, and discussing exactly what you want and need will help determine what type of home loan is the best fit for you.