Century 21 Associates Realty LLC 
     Karen J. McLinden
      Phone 508-677-3233
       Fax 508-679-2006
       657 Pleasant St., Fall River, MA 02721 
                                                                                                                                   
 
Residential Real Estate, Commercial Real Estate, New Construction, Investment Property, Rentals, First Time Home Buyers, Relocating Assistance, Short Sale Assistance.   Areas Include But Not Limited To: Fall River, MA - Swansea, MA - Somerset, MA - Westport, MA - Dartmouth, MA - Tiverton, RI - Assonet, MA - Freetown, MA - Berkley, MA - Taunton, MA - Dighton, MA - Rehoboth, MA - Seekonk, MA - Warren, RI - Portsmouth, RI - Middletown, RI - Little Compton, RI - New Bedford, MA - Lakeville, MA - Middleboro, MA - Fairhaven, MA -   Wareham, MA

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There are many different types of Mortgages to fit the needs of different buyers.  Here are some types of mortgages and a brief description of what they are.  

If you have any questions please feel free to use my 'Local Business' page to contact a Mortgage professional.

Fixed Rate Mortgage

Adjustable rate Mortgage

First-Time Buyer Programs

80/20 Mortgage - Piggyback Loan

Option Adjustable Rate Mortgage

Balloon Loan

Biweekly Mortgage

FHA Mortgage

VA Loans

Wrap-around Mortgage

Interest Only Mortgage

Graduated Payment Mortgage

Simple Interest Mortgage

Reverse Annuity Mortgage

Home Equity Loan

 

Fixed Rate Mortgage

An FRM is a mortgage that has no provision for changing the interest rate. Hence, the rate stated in the note is fixed for the entire term of the loan.

Usually, the term "FRM" also means that the payment is fixed for the life of the loan and pays it off over the term.

FRMs come with different terms, ranging generally from 10 years to 40 years, with the 15 and 30-year being the most popular. (In contrast, ARMs are almost all 30 years.)

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Adjustable rate Mortgage

Most borrowers who take adjustable rate mortgages (ARMs) need them to qualify for the loan they want. Because the initial rate on ARMs is usually lower than the rate on fixed rate mortgages (FRMs), these borrowers can qualify with an ARM but not with a fixed-rate mortgage (FRM). When interest rates rise, fewer borrowers can qualify using FRMs, with the result that ARMs increase in relative importance.

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First-Time Buyer Programs

Many lenders offer affordable mortgage choices geared toward the first-time home buyer. These choices clear the obstacles that made purchasing a home difficult in the past. First-time buyer programs can help borrowers who have not saved a lot of money for the down payment and closing costs, have a poor credit history or no history at all, have quite a bit of long-term debt, or have an unstable income.

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80/20 Mortgage - Piggyback Loan

The main advantage of this type of loan, also known as 100% Financing, is the ability to buy a home with almost no money down. 

Lenders typically require a downpayment of at least 20 percent of the purchase price. If the loan amount is for more than 80 percent of the purchase price,private mortgage insurance (or PMI) is usually required. You can avoid paying PMI by getting a second mortgage ('piggyback loan') to back up your first mortgage.

The first mortgage is provided for 80 percent of the cost of the home and the 'piggyback' second mortgage is for the remaining 20 percent. The 80 percent first mortgage can be a fixed-rate (15-year or 30-year), adjustable-rate (usually 5/1, 7/1 or 10/1 fixed period ARM) or interest-only loan. The 20 percent second mortgage can be a home equity that changes with the prime rate.

Combined, the two loans allow you to purchase 100% of your home with no money down.

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Option ARMs

Flexible payment ARMs carry a variety of names in the marketplace: "1 Month Option Arm", "12 MTA Pay Option ARM," "Pick a Payment Loan", "1-Month MTA", "Cash Flow Option Loan", and "Pay Option ARM". All refer to an adjustable rate mortgage on which the rate adjusts monthly with no adjustment caps, and that allows (but does not compel) borrowers to make very low initial mortgage payments that rise over time.

Most commonly, they are referred to as "option ARMs".

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Balloon Loan

In some respects, a balloon loan looks very much like a 30-year fixed-rate mortgage (FRM). The payments are calculated in exactly the same way. In both cases, the payment is the amount required to pay off the mortgage in full over 30 years. Where the two instruments differ is that, after a specified period, generally 5 or 7 years, the outstanding balance (the "balloon") has to be repaid in full.

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Biweekly Mortgage

The biweekly mortgage dazzles a lot of people because they confuse the interest payments over the life of the loan with the interest rate. Total interest payments paid over the life of a loan depend on the rate, on the amount borrowed, and on how rapidly the loan is paid off. Converting a conventional loan to a biweekly does not change the interest rate. What it does is to use the extra payment you make every year to reduce the balance, which in turn reduces interest payments. The loan is paid off early, just as it would have been if you had begun with a mortgage carrying a shorter term.

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FHA Mortgage

FHA insures lenders against loss in the event that borrowers default on their loans. In this way, FHA encourages lenders to make loans that they might otherwise view as too risky. FHA began operations in the depths of the depression of the 1930s when lenders had stopped making new loans altogether because a sizeable proportion of existing loans were in default. As the country worked its way out of the depression, the FHA settled into the principal role it has today: helping a segment of the low-and-moderate-income population become homeowners who otherwise might not make it because they have shaky credit or can't come up with the cash needed for the down payment.

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VA Loans

Answers to all the easy questions about VA loans are readily available from the VA web site it will tell you who is eligible, how you go about obtaining a Certificate of Eligibility, whether eligibility can be used more than once, the types of properties that can be purchased with a VA loan, the range of insurance premiums for different categories of veterans and different loan purposes, the conditions under which VA loans can be assumed by a buyer, the types of VA home loans, and more.

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Wrap-around Mortgage

A wrap-around mortgage is a loan transaction in which the lender assumes responsibility for an existing mortgage.  The new mortgage "wraps around" the existing mortgage because the new lender will make the payments on the old mortgage.

A wrap-around is attractive to lenders because they can leverage a lower interest rate on the existing mortgage into a higher yield for themselves.

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Interest Only Mortgage

A mortgage is “interest only” if the monthly mortgage payment does not include any repayment of principal for some period.  The payment consists of interest only.  During that period, the loan balance remains unchanged. 

A loan that is interest-only for the full term would not amortize.  The loan balance would be the same at term as it was at the outset. 

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Graduated Payment Mortgage

GPM stands for "graduated payment mortgage", meaning a mortgage on which the payment starts low and rises over time. Since the initial payment is used to qualify the borrower, the GPM may allow a borrower to qualify who would not qualify with a standard fixed-rate mortgage (FRM).

The interest rate on the GPM is fixed, just as it is on a standard FRM. The initial payment on a GPM does not cover the interest. The difference, termed "negative amortization", is added to the loan balance. This rising balance is a feature that lenders don’t like, and it is why they charge a higher rate for GPMs than for FRMs.

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Simple Interest Mortage

The major difference between a standard mortgage and a simple interest mortgage is that interest is calculated monthly on the first and daily on the second.  When a payment is received, it is applied first to the accrual account, and what is left over is used to reduce the balance. When the balance declines, a new and smaller daily interest charge is calculated.

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Reverse Annuity Mortgage

A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:

  • all at once, in a single lump sum of cash;

  • as a regular monthly cash advance;

  • as a "creditline" account that lets you decide when and how much of your available cash is paid to you; or

  • as a combination of these payment methods.

No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.

When a reverse mortgage becomes due and payable, you may owe money and your equity may be very small. If you have the loan for a long time, or if your home's value decreases, there may not be any equity left at the end of the loan.

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Home Equity Loan

There are two types of home equity debt: home equity loans and home equity lines of credit, also known as HELOCs. Both are sometimes referred to as second mortgages, because they are secured by your property, just like the original, or primary, mortgage.

Home equity loans and lines of credit usually are repaid in a shorter period than first mortgages. Most commonly, mortgages are set up to be repaid over 30 years. Equity loans and lines of credit often have a repayment period of 15 years, although it might be as short as five and as long as 30 years.

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© 2013, Karen McLinden & Century 21 Real Estate LLC. CENTURY 21® is a registered trademark licensed to Century 21 Real Estate LLC. Equal Housing Opportunity. Each Office is Independently Owned and Operated.

 

© 2013, Karen McLinden & Century 21 Real Estate LLC. CENTURY 21® is a registered trademark licensed to Century 21 Real Estate LLC. Equal Housing Opportunity. Each Office is Independently Owned and Operated.