Wisconsin
Real Estate Mortgage Loan
If you are a first time home buyer or have purchased
other homes in the past, the type of mortgage you select
is very important in the State of Wisconsin.
Listed below are the many different types of mortgage
loans available to the home buying consumer. There are
many types of home mortgage loans within Wisconsin to
consider with various different offers, options and
home mortgage loan application decisions. In the past
the most popular loan applied for was a 25, 29 or 30-year
fixed interest rate home mortgage loan, the most common
being a 30 year mortgage. Now, there are so many different
options well targeted toward borrowers and individuals
within Wisconsin, in different financial situations
within the state of Wisconsin.
ARM (Adjustable Rate Mortgage
Loans)
If you will be living in your home for only a few
years an Adjustable Rate Mortgage is the best. An adjustable
rate mortgage is also referred to by the acronym "ARM".
ARMS's have a set interest rate and set monthly payment
for a number of years. The mortgage loan payment is
usually based on the amount to payoff the entire mortgage
balance at the end of the term, which is usually 30
yrs.
The most common types of ARMS are 1 yr, 3/1 yr, 5/1
yr and 7/1 yr ARM, After the initial period is over,
the rate and term of the mortgage will be adjusted annually
to current market mortgage rate if you do not refinance
the loan. Most ARMs have caps on how much the interest
rate may increase after the loan expires. ARMS are very
popular because the rates are usually about 2-3% lower
that a fixed rate. This means lower payments and the
average homeowner in the United States moves every few
years where this type of loan is an excellent choice.
The less number of years usually means the lower interest
rate. A 1 yr ARM will have a lower interest rate than
a 5/1 year term. ARM.
Fixed Rate Mortgage Loan
If you know that you are going to be in the house for
many years then a fixed rate mortgage is best. A fixed
rate mortgage is the most common home finance method
and usually are 15 yr or 30 yr mortgage loan. There
are also 20 yr mortgage loans that are offered by some
lenders. A fixed rate mortgage loan is good if you know
you will be living in your home for a long time and
you don't have to worry about your payment ever increasing.
Monthly loan payments will be the same for the entire
life of the loan. The first payment will be the same
as the last payment.
If home mortgage interest rates increase you have an
advantage because your loan interest rate is locked-in
at a lower rate which means your mortgage loan payment
will not increase. But alternatively if interest rates
drop your rate will not go down unless you refinance
your mortgage. Rates went up to 18% at one time and
as low as 4% recently so it is hard to tell what will
happen in the future.
A 15 year home mortgage will have a somewhat lower
interest rate but higher monthly payments than a 30
year fixed mortgage rate. The advantages to this type
of mortgage financing is that you will get more home-equity
by paying down the principal balance. You also will
have the loan paid off faster and will not have paid
as much total interest when the loan ends. It could
save you $100,000 or more in interest.
A 30 or 25 year year home mortgage loan will usually
have a higher interest rate than a 15 year and a lower
payment. This is a good type of loan to get if you are
short on money or cannot qualify for the higher mortgage
payment. If you start to make more money and want to
pay off the mortgage balance faster you can always set
up bi-weekly payments with your lender. You also can
just pay more money every month and apply it to the
principle balance. Mortgage lenders rarely impose a
penalty for this.
Interest-only mortgages
An interest only mortgage is where the borrower only
pays the interest on the loan each month. This means
property debt never declines. Many borrowers get this
type of loan because the rates are real low and the
payment is low. An interest-only mortgage may be good
if you expect to earn a lot more in a few years and
know you will be able to afford a higher mortgage payment
later on where you can always refinance your loan. Another
great thing about an interest only home loan is that
you can start paying down the principle balance if you
have extra money. It is a good idea to check if your
lender has a penalty for doing this. Wisconsin homeowners
may choose interest only mortgages because they are
planning to invest funds and make money on the savings
on the difference between an interest-only mortgage
and a regular amortizing house mortgage loan with principle
and interest. |
