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Home Equity Loans Categories

Fixed Rate Mortgages: These loans have a fixed rate of interest over the entire term for which the loan has been disbursed. The term for these mortgages is typically between 10 to 30 years. The monthly interest payment on these loans is fixed and hence there exists a certainty about the repayment of the debt over the entire term of the debt. Another advantage of fixed rate mortgages is that the initial down payment required is very low, generally around 5% of the loan amount to be disbursed.

The disadvantage of this type of loan is that the rate of interest may be higher than that of a variable rate mortgage. If predictability of the interest payments is important, then it is advisable to consider securing a fixed rate mortgage.

Adjustable Rate Mortgages (ARM): As the name indicates, the interest rate on this type of mortgage fluctuates throughout the term of the loan depending on the interest rate scenario in the economy. The rate for an ARM is usually adjusted annually.

An ARM usually has caps, which restrict the rise in the rate to a certain level, both on an annual basis as well as over the entire term of the loan. For example, an ARM may have a cap of 1% every year and 5% over the term of the loan. This type of loan is best if the term of the loan is short, as the longer the term, the more the exposure to fluctuations in the interest rate. The index to which the variable rate is pegged should also be carefully considered.

Thus a variable rate mortgage can work out to be a cheaper option than a fixed rate mortgage, provided the borrower has given due attention to the risks involved.

Jumbo Loans: If the equity loan to be raised exceeds the federal guidelines set by Fannie Mae/Freddie Mac, then the loan is referred to as a jumbo loan. The limit set by the guidelines is different from state to state. The rates for jumbo loans are typically higher than those for other types of mortgages, as the lender has a higher risk due to the larger amount of the loan. The borrower should try not to exceed the guidelines, as this could mean a considerable savings in terms of interest outflows.

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RELATED MORTGAGE AND REFINANCING ARTICLES: Get the Best Rate on Your Home Mortgage Loan Home mortgage interest rates hit record lows in 2004 and have remained at record lows as we go through 2005. It is possible today to get a thirty-year fixed rate home mortgage loan for under five percent, and an adjustable rate mortgage can be found for under four percent if you look hard enough! However, record low mortgage rates do not mean that you should take the first mortgage offer made to you, even if it sounds low. Before You Buy Before you start looking for a home, figure out what you can realistically afford to pay per month. Check out the market in the area you want to buy. Secured Homeowners Loans - In Case You Thought a Home is Worth Few Dollars Money is like music, if managed well, produces a good symphony. One wrong note - one wrong decision - it produces a jarring sound. Adjustable Rate Mortgages Offer Alternatives For Home Buyers When looking for a mortgage to meet your needs, consider these key questions: Is your income expected to increase in the coming years? How long do you plan to live in your new home? And, which mortgage will provide the lowest interest rate?While 15 or 30 year fixed-rate mortgages are the most popular, and Adjustable Rate Mortgage (ARM) offers some interesting alternatives for home shoppers who plan to move again within four or five years. Although interest rates are the lowest they've been in 20 years, an ARM provides even lower interest rates during its introductory period. Should You Refinance Your Mortgage if Interest Rates Drop? Mortgage refinancing is when you take a mortgage of a certain interest rate and term length, and change it for a different interest rate and term. If you are looking to refinance your home loan it is usually done when rates have dropped considerably therefore making it advantageous to do so. 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Refinance Your House If you have seen all the advertisements regarding refinancing your house you may be wondering if refinancing can actually save you money. The answer is yes! Interest rates are at the lowest levels in decades and there has never been a better time to refinance your home. Getting The Best Home Equity Loan Owing to the popularity of home equity loans, there are numerous lending agencies offering a variety of mortgage products. A bad choice of mortgage can lead to disastrous effects, as there is a risk involved of foreclosure and losing one's home.

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