| If you are a first time
home buyer or have purchased many homes, the type of
mortgage you select is very important in the State of
Alaska.
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Below are the many types of mortgage loans available
to the home buying consumer. There are many types of
home mortgage loans within Alaska to select from with
lots of different offers and home mortgage loan application
decisions. In the past almost everyone applied for a
25, 29 or 30-year fixed interest rate home mortgage
loan, the most common being a 30 year mortgage. Now,
there are so many different mortgage options that are
well targeted toward borrowers and individuals within
Alaska, in different financial situations within the
state of Alaska.
ARM (Adjustable Rate Mortgage Loans)
If you think you are only going to be living in your
home for a few years an Adjustable Rate Mortgage is
the best. An adjustable rate mortgage is also referred
to by the acronym "ARM". ARMS's have a set
interest rate for a number of years and a set monthly
fee. The mortgage loan expense is usually based on the
amount to payoff the entire mortgage balance at the
end of the term, which is usually 30 yrs.
The most common types of ARMS are 1 yr, 3/1 yr, 5/1
yr and 7/1 yr ARM, After the initial period is over,
the rate and term of the mortgage will be adjusted annually
to current market mortgage rate if you do not refinance
the loan. Most ARMs have caps on how much the interest
rate may increase after the loan expires. ARMS are very
popular because the rates are usually about 2-3% lower
that a fixed rate which means lower monthly cost. The
less number of years usually means the lower interest
rate. A 1 yr ARM will have a lower interest rate than
a 5/1 year term. ARM.
Fixed Rate Mortgage Loan
If you know that you are going to be in the house
for a number of years then a fixed rate mortgage is
best. A fixed rate mortgage is the most common home
finance method and usually are 15 yr or 30 yr mortgage
loan. A fixed rate mortgage loan is good if you know
you will be living in your home for a long time and
you don't have to worry about the cost of your mortgage
loan increasing. Monthly loan expenses will be the same
for the entire life of the loan. The first set fee will
be the same as the last fee.
If home mortgage interest rates increase you have an
advantage because your loan interest rate is locked-in
at a lower rate which means your mortgage loan expense
will not increase. But alternatively if interest rates
drop your rate will not go down unless you refinance
your mortgage. Rates went up to 18% at one time and
as low as 4% recently so it is hard to tell what will
happen in the future.
A 15 year home mortgage will have a somewhat lower
interest rate but higher monthly payments vs a 30-year
fixed rate mortgage loan. The advantages to this type of
mortgage financing is that you will get more home-equity
by paying down the principal balance. You also will
have the loan paid off faster and will not have paid
as much total interest when the loan ends. It could
save you $100,000 or more in interest.
A 30 or 25 year home mortgage loan will usually have
a higher interest rate than a 15 year and a lower monthly
cost. This is a good type of loan to get if you are
short on money or cannot qualify for the higher mortgage
expense. If you start to make more money and want to
pay off the mortgage balance faster. You also can just
pay more money every month and apply it to the principle
balance. Mortgage lenders rarely impose a penalty for
paying off your mortgage quickly.
Interest-only mortgages
An interest only mortgage is where the borrower only
pays the interest on the loan each month. This means
property debt never declines. Many borrowers get this
type of loan because the rates are real low and the
cost is low. An interest-only mortgage may be good if
you expect to earn a lot more in a few years and know
you will be able to afford a higher mortgage cost later
on where you can always refinance your loan. Some Alaska
homeowners may choose interest only mortgages because
they are going to invest funds and make money on the
savings on the difference between an interest-only mortgage
and a regular amortizing home mortgage loan with principle
and interest.
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