Fixed-rate programs are available for 30, 20, 15 and 10 years. A fixed-rate mortgage allows you to lock in an interest rate for a specified period of time. If you’re planning to be in your home for a long time—or if you simply like the security of locking in an interest rate—a fixed-rate mortgage may be just right for you. The most common fixed-rate programs are 15 and 30 years.
Adjustable Rate Mortgage (ARM)
Compared to fixed rate mortgages, Adjustable Rate Mortgages (ARMs) offer a lower interest rate to start, so your monthly payments are generally lower. But, the interest rate moves up and down with the market based on an "index". Some of the more common indices include U. S. Treasury Bills, Cost of Funds Index (COFI) and the London Interbank Offered Rate (LIBOR). Most ARMs have an initial fixed rate period where the interest rate doesn’t change followed by the rest of the loan’s lifetime period where the rate is adjusted at predetermined intervals. Many ARMs have caps that limit how much your interest rate can change per period as well as for the life of the loan.
Also be aware that there are some very low rates ARMs that start out with "discounted" rates. These discounted rates are below the market rate and will definitely go up at the first adjustment period.
Adjustable rate mortgages might be right for you if:
- You want more property than you can qualify for now with a fixed rate.
- You are confident your income will increase or rates will not go up much.
- You plan on selling or refinancing within seven years of buying your home.
Interest-only mortgages offer competitive rates with varying terms for owner-occupied, vacation and investment properties. Benefits include payment of principal on your terms and additional money in your pocket to cover growing monthly expenses.
Construction loans are used to finance the building of a new home rather than purchase an existing home. They are usually variable-rate loans that have interest only payments during the construction phase. Draws are scheduled based on the stages of construction to pay the builders.
Many construction loans are construction-to-permanent which means that when construction is complete, the loan is converted to a normal mortgage. This has the advantage of a single loan with one closing.
At Hub Mortgage Group, our goal is to help prospective homeowners turn their dreams into reality. As such, we offer first-time homebuyer programs with flexible guidelines at the lowest rates in the industry. We’ll help you evaluate the financial benefits of building equity versus paying rent and demonstrate how homeownership can even reduce your overall monthly expenditures—not to mention instill an immeasurable sense of pride and accomplishment.
Government loan programs
An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.
FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans.
Some of the other benefits of FHA financing:
- Only a 3 percent down payment is required.
- Closing costs can be financed.
- Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancellation of the premium.
- More flexible underwriting criteria than conventional loans
- FHA limits the amount lenders can charge for some closing cost fees
- Loans are assumable to qualified buyers.
VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.
Other benefits of a VA loan include:
- Negotiable interest rates.
- Closing costs are comparable and sometimes lower - than other financing types.
- No private mortgage insurance requirement.
- Right to prepay loan without penalties
- The Mortgage can be taken over (or assumed) by the buyer when a home is sold.
- Counseling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.
Although mortgage insurance is not required, the VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.
A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.
Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program. A Certificate of Eligibility from the VA must be presented to the lender to qualify for the loan.
Reverse mortgages enable homeowners 62 years or older to access the equity in their primary residence without selling their home.
You paid for your home for many years, and now your home can begin to pay you back.
Maybe you could use some extra money for monthly obligations, or perhaps you would like to vacation, purchase a motor home or even a second home. Your options with a reverse mortgage are to take a lump sum of money at closing, or receive monthly payments for life, or both. For many people a reverse mortgage is a blessing.
The reverse lender pays you money based on the equity you've accrued in your home. Repayment is not necessary until 6 months after the borrowers no longer utilize the home as their primary residence. When you sell your home or no longer use it as your primary residence, you or your estate must repay the cash you received from the reverse mortgage plus interest and other deferred finance charges.
Reverse mortgages are ideal for homeowners who are retired or no longer working and would like to supplement their income. Interest rates can be fixed or adjustable. The money is nontaxable and does not interfere with Social Security or Medicare benefits. Your lender cannot take the property if you outlive your loan, nor can you be forced to sell your home to pay off your loan even if the loan balance grows to exceed property value.
Reverse Mortgages are not just attractive to people that need extra income. In recent years, some with above average means have obtained a lump sum reverse mortgage on their primary residence and utilized the loan proceeds to purchase a second home, and there is no payments due for life on either home.
HUB MORTGAGE GROUP would look forward to exploring the many reverse mortgage options that are available to you. There is never an obligation to talk, and if a reverse mortgage is not for you we will be the first one to advise you accordingly.
A Home Equity Line of Credit, also known as a HELOC, is an open-ended loan that is secured by real property. Like a credit card, it is a revolving line of credit which allows the consumer to borrow only the amount that he or she needs (up to a predefined limit), pay it off and have that credit available to use again. Helocs have become very popular during the last several years of unprecedented refinancing by homeowners, due at least in part to the flexibility that they offer.
Helocs are generally specialized adjustable-rate mortgages, meaning that their interest rates are tied to a certain financial indicator, or index, and can fluctuate up or down, sometimes quite quickly. The monthly payment will therefore also fluctuate.
A home equity loan, HELOAN is a fixed or adjustable rate loan that is secured by the equity in your home. With a home equity loan, you borrow a lump sum of money to be paid back monthly over a set time frame, much like your first mortgage. The terms “home equity loan” and “second mortgage” are often used interchangeably.
The process for a home equity loan is similar to your first mortgage. The closing costs (often 2-3 percent of the loan amount) are usually lower and, although the interest rate is higher on a home equity loan, the interest paid is tax deductible.
HELOCS are usually used as second mortgages and, as such, have a 20-year term. The first 10 years of the term are known as the draw period. During this time the line of credit can be used over and over again, up to the credit limit. The borrower can pay off the full amount borrowed, or make interest-only payments during the draw period. Once the draw period ends, however, the borrower can no longer take money out of the line of credit. If there is an outstanding balance at the end of the draw period, the borrower’s payments become amortized to pay off the loan within the remaining period of the term.
HELOCS have the advantage of allowing the borrower to use and pay for only the amount that is needed at the time. Interest payments are also usually tax-deductible, which makes the cost of borrowing funds lower. High interest non-deductible debt (such as credit cards and car payments) can be converted to tax-deductible debt.
To qualify for either second mortgage, your credit must be in good standing and you must be able to document your income. An appraisal will be required on your home to determine the home's market value.
There are possible disadvantages which must be addressed, as well. A HELOC’s adjustable interest rate could rise, taking the borrower’s monthly payment along with it. And, after having made interest-only payments for the entire draw period and not paying any of the principal, a homeowner could find him- or herself stuck with a large principal balance to pay back, and with only 10 years to do it. This could make for a quite hefty loan obligation.
However, handled with the proper knowledge and prudence, a HELOC can be a very useful financial vehicle for the homeowner that can utilize its unique capabilities.