Understanding Home Loan Types and Options

There are only a few types of loans with a handful of different options. Once you understand these choices, the world of home loans will be a lot less complicated.

Fixed Rate vs. Adjustable Rate Loans

One major choice you have is whether to lock in your rate for the full duration of the loan (a fixed rate) or to allow the rate to change during the loan (an adjustable rate). Read more on Fixed Rate vs. Adjustable Rate Loans.

Fully Amortized vs. Negative Amortized Loans

For generations, all home loans amortized debt, (paid it off fully), over the course of the loan. Recently, the Negative Amortized (NegAm) loans have become popular loans that allow you to lower your monthly payment by in effect, borrowing more money each month from your built up equity or your original downpayment. A NegAm loan could be your savy technique to getting into a bigger property in a hot market or your road to financial ruin in a cold real estate market. Read more on NegAm Loans.

Piggyback Loans vs. Private Mortgage Insurance

For decades, standard practice had bankers requiring a 20% downpayment for mortgage loans. Private Mortgage Insurance (PMI) was then created as a form of insurance for those borrowers who could not come up with the 20% down. Piggyback Loans vs. PMI