Interest Only Mortgages One new trend in mortgages that is very popular right now is interest only loans. The buyer may elect to make lower payments for two years, five years, or ten years.

Adjustable Rate Mortgage (ARM) Generally, a homebuyer is locked into a certain interest rate for a 3-year period with an ARM loan. After this rate fluctuates with prime rate. Rebecca Nichols, a mortgage broker, says, “I usually recommend people commit to an ARM rate for 3 years. When value of home has gone up, I recommend they refinance into a 30-year fixed mortgage or another ARM, depending upon whether they want to stay in home.” There are interest only ARM loans available too. These loans are popular with real estate investors because mortgage is easier to cover if they lack a tenant for several months. Interest only ARMS often homebuyers will be able to obtain a bigger house or something closer to what they want with an ARM.

80/20 Combo – Fixed or ARM Some clients prefer to avoid paying mortgage insurance, which is not tax deductible. If this is their preference, Nichols recommends “finance 80% of loan in one loan, and 20% in another. ARMS can also be split this way.

30 Year Fixed Mortgage If you plan on residing in same home for at least 20 years, this is perfect way to go. It’s a standard, fixed rate for whole loan duration. Remember to shop for a mortgage, just as you would for auto, home, health insurance, or auto loans. Be wary of obtaining your lender on internet. Some sites may promise rock bottom interest rates, but hidden costs and fees can add up. Also, having a lender present at closing is an invaluable resource to homebuyer. The loan officer or mortgage broker should be present to make certain loan documents are correct and answer questions. A lender on another coast is probably not going to provide you with this type of service. If you’re in market for a home and a mortgage, choosing right lender will help you get more bang for your buck and type of dwelling you desire.

-Pay your balance each month to avoid interest charges -Pay your bill on time to avoid late charges -Avoid cash advances, which come with large finance charges and interest that begins accruing immediately.

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