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the past almost everyone applied for 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 Atlanta,
in different financial situations within the state of Georgia.
ARM (Adjustable Rate Mortgage Loans)
If you think you are only going to be living in your home
for 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 steady
monthly cost for a number of years. The mortgage loan expense
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 which
means lower monthly cost. 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 a
number of 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. 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 monthly expense
ever increasing. Monthly loan expense will be the same for
the entire life of the loan. The first monthly fee will be
the same as the last.
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 expense 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 fee 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 monthly
fee. This is a good type of loan to get if you are short on
money or cannot qualify for the higher mortgage cost. If you
start to make more money and want to pay off the mortgage
balance faster. You also can 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 monthly cost 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
cost later on where you can always refinance your loan. Some
Atlanta Georgia homeowners may choose interest only mortgages
because they are going 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.
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