Home Loan Options and Information
Fixed rate home loans are simple interest, fully amortized loans, with payments that remain the same for the full term, which is usually for 30 or 15 years, although some home lenders may offer variations such as 20 year loan terms. The advantage of a 15 year home loan is the accelerated principal reduction, while the disadvantage can be the higher monthly payments.
Mortgage lenders categorize home loans into two groups based on the loan amount, conforming loans with a current maximum of $333,700 for single family homes, and non-conforming loans with an amount over the conforming limit. The reason has to do with mortgage investors like Fanniemae or Freddiemac, but to the consumer, the main difference is the interest rate. Non-conforming home loans usually have a higher rate of up to 1/2%.
Adjustable rate home loans are typically 30 year, simple interest, fully amortized loans, which may not be subject to the conforming lending limits. The interest rate is determined by adding an index plus a margin. The index is a financial point of reference, such as, the 11th district cost of funds or the one year treasury, and is the part that fluctuates according to economic conditions, while the margin always remains the same. Rate adjustment periods can be monthly, every six months, or yearly, and hybrid types of home loans which are fixed for the initial 3, 5, or 7 years, with the remaining term adjusting usually on a yearly basis.
The available options for taking equity out of your home would be either a cash out refinance, a home equity loan, or a line of credit. Taking cash out on a refinance can typically be limited to a maximum of 80% of value, while a home equity loan and some credit lines can go as high as 100% of value. |
