hether your are because the payments and interest
obtaining a mortgage for rates can be significantly lower.
your first home, or your The problem is that the interest
tenth in a series of real estate rate will fluctuate along with
investments, the type of mortgage the prime lending rate. This
you choose will have a lasting means your mortgage payment could
impact. The consistency of your increase at any time. This is a
payments, the amount of interest good option only if you know you
you pay, and the amount of money can handle the jump in payment
you put down will all affect your without consequence.
decision. Here’s a quick glossary
of the terms you need to know. Interest Only Mortgage Loans
Fixed vs. Variable Mortgage Loans If you have ever looked at the
amount of interest and principle
The standard 30 year fixed real paid on an actual real estate
estate mortgage isn’t so standard mortgage payment, then you know
anymore. It’s still extremely why interest only loans are so
popular because you can lock in a popular. Someone who pays $1,250
one-time interest rate that will monthly, at a 5.875% interest
stay consistent over the life of rate, is actually making a
your mortgage. But this doesn’t payment of about $670 to
work for everyone, which is why interest, $400 to escrow, with
the other real estate mortgage only $180 going towards paying
options have evolved. off the principle of the loan. By
paying off the interest in the
The variable mortgage, also early years of the loan, your
called an adjustable rate monthly payment will be
mortgage (ARM), or floating significantly lower. A
mortgage, is often attractive traditional mortgage would
require that additional payment
to principle each month. Negative Amortization
While your payments with an A negative amortization loan is
interest only real estate most often used in areas where
mortgage loan are guaranteed to real estate costs are very high,
jump once the interest is paid with the goal of helping people
off, this can work towards your who could not otherwise afford to
advantage in some situations. For buy into the area. Basically, the
instance, a young person just real estate lender agrees that
starting out in a career may the mortgage holder will pay less
expect to be making more money by than the amount of interest due
the time the monthly real estate each month for a short, usually 5
payment increases. Also, the year, period of time. The owed
flexibility can allow you to amount is tacked on to the
borrow more money, or create more remaining real estate loan at the
cash flow in your real estate end of that period. Also known as
investment, in those early years. a deferred interest or Graduated
Payment Mortgage (GPM), this is
On the down side, you don’t considered risky since the “jump”
accrue any real estate equity at the end of the lower payment
when you’re not paying off the period will be significant.
principle amount owed. Also, the
unpredictability of the real Balloon Mortgages
estate market makes this a
riskier loan. Most financial Balloon Mortgages have inspired
advisors also counsel against come controversy in the real
taking out an interest only loan estate industry, because some
if you can’t afford the house shady real estate professionals
without it. have advised them
inappropriately. With a balloon especially appealing when
mortgage, you pay a fixed rate interest rates are high. Just
for a specified period of time remember, have a plan, and a back
(5/7/10 years) and then pay off up plan, for paying off the final
the remaining principle in a lump amount if you are thinking about
sum when that time is up. a balloon mortgage.
Balloon mortgages are attractive The best advice is probably to
because the interest rates are talk to someone you trust who has
usually lower. One way to use a a good real estate background,
balloon mortgage for your real and who can assess your specific
estate purchase is to take situation. Every real estate
advantage of the lower interest transaction is different, and so
rate, and then attempt to are your mortgage needs.
refinance at a low fixed rate at
the end of the term. This is
About the Author:
John Harris is a researcher and writer on applicable real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more information please visit Del Mar Realtors
Read more articles by:
John Harris
Article Source: www.iSnare.com 
