Affiliated Mortgage LLC: Innovative Mortgages To Satisfy All Homeowners

With rising real estate costs, lenders have realized that new mortgages must be created and old mortgage loans altered. Americans are demanding more options for home loans, luckily, lenders are heeding the call.

Mortgage lenders have acknowledged the problem of rising home costs by creating new and innovative mortgage products designed to lower the borrowers’ payments in the first few years of the mortgage. Many of these products allow borrowers to buy homes that they traditionally couldn’t afford, with lower initial payments comes greater risk.

The latest and most exotic mortgages include:

The 40-Year Mortgage
The Portable Mortgage
The Interest-Only Mortgage
The Negative Amortization Mortgage
The Flex-ARM Mortgage
The Piggy Back Mortgage
103s and 107s
Home Equity Line of Credit
Loan Modification Mortgage
Short-Term Hybrids

The following serves as a primer of each new or amended mortgage loan. Consult with respected mortgage brokers for more information.

The 40-Year Mortgage

This mortgage is akin to a fixed rate mortgage. The only difference being that the lender will charge a slightly higher interest rate (as much as half a percentage point) than a 30-year fixed rate mortgage.

A 40-year mortgage means lower monthly payments than a 30-year loan, while also allowing you to lock-in today’s interest rate. If you buy a $300,000 mortgage at a 6.25% interest rate, you could be saving $95 each month in payment.

The downside of such a mortgage is that the borrower will ultimately pay more in interest.

For a $300,000 mortgage, a home buyer will spend an additional $170,030 in interest with a 40-year mortgage.

The Portable Mortgage

A portable mortgage enables a borrower to transfer their mortgage balance to a new property without any added penalties. Portable loans are great for those on the move. The borrower will pay a fee to transfer the loan, however this is the only added cost associated with a portable mortgage. The original terms of the loan will not change.

This product is good for those who know they will move in a few years, but still want to lock in a low rate.

The Interest-Only Mortgage

An interest-only mortgage almost sounds too good to be true. In such a mortgage, the borrower pays only the interest for the first few years of the mortgage. After this initial period, the loan essentially becomes a new mortgage with the interest and principal being stretched only the remaining years. For example, you may pay no principal for the first ten years, and then pay the principal and interest for 20 years.

Such a unique loan feature gives you a smaller monthly payment during the interest-only repayment period. During this time frame all money being paid is tax deductible.

But as to be expected there is a downside to such a loan. If home prices don’t rise, your equity won’t build during the interest-only years. When your principal-payment period begins, the monthly payments will rise significantly. Most of these loans feature variable interest rate, which puts you at risk for even higher monthly obligations.

This type of mortgage is advisable for those sure that their income will rise significantly in the next few years. Interest-only loans are also a good fit for professionals who receive large bonuses as part of their pay. They can pay interest during most of the year and then put the bonus towards the principal.

The Negative Amortization Mortgage

This mortgage appeals to borrowers by allowing them to pay less than the full amount of interest for a period of time. The difference between the full interest payment and the amount actually paid is added to the balance of the loan.

This gives you the option of a much smaller monthly payment during the first years of a loan.

But, this is probably the most risky mortgage available. If the value of your home falls, you will owe more money on the house than it is worth.

Such a loan could suit those with large cash reserves who need to make lower payments during certain parts of the year, but can pay off the difference in large chunks at other times.

The Flex-ARM Mortgage

When you cross a hybrid loan and a negative amortization loan you get a flex-ARM mortgage. Such a loan offers a low fixed interest rate for the first 5-7 years before adjusting annually. Each month you receive a coupon that gives you four possible payment options: negative amortization, interest-only payment, 30-year fixed and 20-year fixed. The homeowner decides how much he wants to pay.

The bank handles all of the calculations for you, but you have to decide which payment plan works best for you.

A Flex-ARM is best for intelligent buyers that like to constantly evaluate their options. The borrower should have large cash reserves for when the mortgage payments enter the later part of the loan. Like interest-only loans, they are great for those who receive bonuses during the year.

The Piggy-back Mortgage

This is a mortgage sandwich, with one loan right on top of the other. The first mortgage covers 80% of the property’s value. The second covers the remaining balance at a slightly higher interest rate.

Some borrowers choose a piggy-back mortgage because it allows them to put less than 20% down and still avoid paying private mortgage insurance. The money that ould be used towards private mortgage insurance is now tax deductible as interest paid.

However homeowners should expect to pay a higher interest rate on a second mortgage. The rates vary greatly depending on one’s credit score. Since the borrower has very little equity in the home, there is the fear of the home losing value and the borrower owing more than they can sell it for.

Piggy-back mortgages suit young professionals with high salaries, but no savings.

103s and 107s

Some loans seem to defy logic. You could borrow 3% or 7% more than your home is even worth with 103s and 107s.

These loans give borrowers the ability of borrowing money needed for closing costs and moving costs. All costs can be included in the mortgage.

As a consequence of borrowing more than the house is worth the interest rates for these mortgages are higher than normal. You run the risk of negative equity if your home loses value.

Home Equity Line of Credit

You don’t need to own a home to use a home equity line. They are commonly known as HELOCs and can finance an original home purchase using a credit line instead of a traditional mortgage. HELOCs are variable-rate mortgages tied to the prime rate. If you use this mortgage as your first mortgage, all of the interest is tax deductible. All borrowers need to do is pay a down payment and the HELOC pays the remainder. You can usually use one for up to 90% of the home’s appraisal value. For a higher interest rate, you may qualify for 100%.

HELOCs have the potential to offer more attractive interest rates. You can also use the equity you build in your home at any time.

The downside to HELOCs is that they are usually structured for 10 to 20 years, instead of 30. The interest rate is variable, which means that your payment can rise at any time.

HELOCs offer borrowers the ability to pay off your home quickly, while offering access to equity at any time. You might consider a HELOC as your primary mortgage.

Loan Modification Mortgage

This type of loan is not for everyone. It allows borrowers to change the terms of the loan when they please. A loan can be changed by paying $1,000 for closing costs for every one million dollars borrowed. Changes to mortgages can be made swiftly with nothing more than the use of a phone call.

Borrowers can change the rate when they please but must also take into account the fees charged every time an alteration is made. Many customers with this type of mortgage have financial planners that manage the mortgage.

Short-Term Hybrids

These mortgages are similar to traditional hybrid ARMs with fixed-rate periods and a floating interest rate. However the fixed portion on a short-term hybrid is for a very limited time, for example, six months to a year. Lenders offer very competitive rates on these mortgages.

The interest rates are very low for the fixed portion of the loan, making the initial monthly payments relatively small. But this initial period only lasts about six months or a year. Rates can change dramatically in just that amount of time.

People who plan to flip a house or move in a very short period of time might enjoy a short-term hybrid ARM.

As you can see the real estate market is flush with mortgage options. To dig deeper into what mortgage you’re suited for call the trusted Rapid City lenders at Affiliated Mortgage.