Loan Resources and Information.

Intimidating. Overwhelming. Confusing. Each word has been used to describe Mortgage Loans. Once broken down and simplified, Mortgage Loans become far less daunting.

There are three broad categories for Mortgage Loans: Fixed Rate Mortgages, Adjustable Rate Mortgages, and Balloon Mortgages.

A Fixed Rate Mortgage is a Loan in which the interest rate never changes. If an interest rate stays constant then a payment stays constant. Payments on a Fixed Rate Mortgage are almost always full principal and interest payments. This means that monthly payments consists of an interest amount, which goes directly to your lender, and a principal portion that will chip away at your loan balance. As your loan balance decreases, a greater portion of the monthly payment will go towards Principal. A Fixed Rate Mortgage offers security. With a Fixed Interest Rate and Fixed Monthly payments, a borrower is able to make a budget because they know their payments will never change. In addition, because there is a set duration for a Fixed Rate Mortgage, typically 15 or 30 years, a person is guaranteed that their loan will be repaid (their house will be paid off) in a specific amount of time. When this happens a loan is referred to as “fully amortized.”

The second common Mortgage Loan is an Adjustable Rate Mortgage. Adjustable Rate Mortgages, or variable rate mortgages, have an interest rate that increases or decreases over the life of the loan based on market conditions. The start rate is normally lower than the rate offered on a Fixed Rate Mortgage. Changes in the interest rate are determined by a financial index. Although Adjustable Rate Mortgages have low, initial interest rates, payment patterns are uncertain.

Balloon Mortgages generally consist of equal monthly payments based on a 15 to 30 year term. However, at the end of the 15 to 30 year loan period your loan will not be paid off in its entirety. A balloon Mortgage has a “balloon term,” generally 3, 5, 7, or 10 years, at which time a large final payment is due, equal to the remaining balance on the loan.

Within in these three broad categories there are many other types of Mortgage Loans. Think of Fixed Rate Mortgages, Adjustable Rate Mortgages, and Balloon Mortgages as Vanilla, Chocolate, and Strawberry Ice Cream. There are many other flavors to choose! Those most common in today’s market are Interest Only Loans, Negative Amortization Loans, and Hybrid Loans. While the idea of these Mortgage