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Topic: Keepin Your Loan Payments Comfortable In The Rising Interest Rate Market
With interest rates appearing to get higher each day, you may wonder just how you can get your mortgage payment lower?
Here are two ways you can lower your monthly mortgage payment to either provide "payment relief" or to allow you to qualify for a larger loan.
Option One is an Intermediate ARM. This type of loan is at a fixed rate for the first 3, 5, 7, or 10 years and then the loan becomes an adjustable rate loan. Because the lender is guaranteeing the rate for less than 30 years, the initial fixed rate is usually lower than the rate for a 30 year fixed rate mortgage. Because the loan term is based upon a 30 year amortization, the payments are stretched out for that time period.
When this loan becomes an adjustable rate loan the rate will change either once or twice each year. The new rate is based upon a published Index and a Margin which is a percentage that is added to the Index. The monthly payment changes the month following the change in the rate.
Option Two is similar to the Intermediate ARM but allows for an "interest only" payment for a specific number of years. Most often the term that allows for the "interest only" payment corresponds with the initial fixed rate period. Since the monthly payment contains no principal, the outstanding balance due on the loan remains constant and does not reduce with each payment made.
Both of these loan options are excellent for lowering a monthly payment. This may mean that you can qualify for a larger loan or have more comfortable monthly mortgage payments. These Intermediate ARM options are not that attractive after the rate becomes adjustable. The new adjustable rate usually is higher than the initial fixed period. And. if one had been making "interest only" payments, the entire original loan amount may now be amortized over a shorter period.
For more information on how these types of loans may bendfit your situation, call Mendocino Mortgage. |
