Mortgage is one of the most important topics in the century because 2009 World Crisis and especially US economic crisis is connected to problems on mortgage payments and government made many changes on law after crisis. It’s an easy way to own a home but it’s also problematic when you are behind the pay date. Many people in USA couldn’t pay their debts on Mortgage in 2009 but they couldn’t sell their houses also. Money system worked with the planning that mortgage owners will pay but when most of the people didn’t pay it, it caused a chaos and economic crisis. Today there are different mortgage types in USA. How many types of Mortgage are there?
After crisis, government decided to set Mortgage into two categories. They are the adjustable-rate mortgage and the fixed-rate. But there are also many variations on payments. Most important factors on Mortgage are making predictable payments list and paying as least as possible. Also there are some new ways like reverse mortgage.
The 30-year fixed-rate mortgage is the oldest and most known Mortgage type. Borrower will pay the debt of Mortgage in 30 years. Payment way is fixed interest rate. Payments are same on a lifetime. Most of the Americans are still using this method. Best point of the 30-year fixed-rate mortgage is fixed interest rate. It means borrower will know what she will pay and there won’t be any unpredictable payments. Also payment is not connected to interest rate changes so it’s same on the lifetime. Payment level is also lower than 15-year fixed rate payment. Most of the 30-year fixed-rate mortgage borrowers are people who are living in small cities and don’t want to change their home.
The 15-year fixed-rate mortgage is very similar to the 30-year fixed-rate mortgage in rules. Many people choose The 15-year fixed-rate mortgage when they married and it means when their children went to college or they retired, they can own the house. But monthly payments are higher than The 30-year fixed-rate mortgage so it’s not preferring by most of the people. There was no 15 year fixed-rate mortgage in the 70s but today life is changed and it’s one of the most popular Mortgage ways.
The adjustable rate mortgage or ARM with its popular name is the way that borrower takes the risk of increasing interest rates in future. But it has lower payments than fixed-rate mortgages. Most of the borrowers choose this type of Mortgage because of lower initial payment but the risk is high in our world because of current economic crisis and war. Also period that interest rate changes is very important on this type of Mortgage. Change period of specific interest rate index is based on agreement between owner, borrower and bank. There are some caps adding to payment like floor cap, life cap and payment cap. People mostly choosing this type of Mortgage are managers and traders who think their income will raise in a period.
There are also Mortgage offers like “Mortgages allowing interest-only payments,” “Loans with pre-payment penalties,” “Reverse mortgage” and Buydown mortgage. Some of them are only possible on the limited time, in the house market rises or downs, economic fluctuations or crisis. Also some of these payments allow extra fees that give a chance to stop when it’s economic crisis or other problems on market.
Choosing the right Mortgage payment type can be vital because economic crisis is triggering discharges and sometimes they are continuing for years. Effects of 2009 economic crisis is still effecting the market all over the world.