Sometimes, understanding everything associated with a home loan can be confusing. Because of this, we wanted to provide you with some information to help with some of the common terms you would hear when buying or selling a loan.
30-Year Mortgage Loan
For this type of loan, during the first 23 years, the majority of the monthly mortgage payment goes toward interest rather than principle. Because of this, you would also get a larger tax deduction initially.
20-Year Mortgage Loan
For the 20-year mortgage, interest rates are typically lower than what you would get with a 30-year loan. For this type of loan, you have the opportunity to save a considerable amount of interest cost because the mortgage is paid off 10 years sooner than with the standard 30-year loan.
15-Year Mortgage Loan
In this case, the mortgage loan is made with a lower mortgage rate. You will also find that equity builds faster due to early payments paying off principle. In addition, the 15-year mortgage offers tremendous savings on interest.
Balloon Loans
The balloon loan offers a low interest rate for a period of five, seven, and ten years. Then, at the end of the term, a lump sum payment for the outstanding balance is due when the loan is re-financed.
Buydowns
For the buydown, interest rate and monthly payment would stay the same but for a specific amount of time. However, the rate and payment increases one, two, or three times depending on the type of loan. Once the payment increases have all occurred, the loan would stay fixed for the remainder of the loan’s life.