With the US real estate industry speculating a sharp drop in home prices soon, the newspapers are splashed with real estate mortgage companies offering lucrative schemes to make you think your dream house was the easiest thing to own. Home Mortgage is serious business and is better off when considered a risk-management vehicle, rather than as a financier.

Bankratesauthority helps you in understanding various mortgage options available:

  • Fixed Rate Mortgages: This is the most ancient of them all and indicates a constant interest throughout the tenure, which could range from 10 to at times even 50 years.
  • Variable Rate Mortgages: Better known as ‘floating mortgages’ because of the staggering style in which paybacks are made in a year’s time. The interest rates can be adjusted between ‘feel rich’ and ‘feel poor’ times in the Mortgage borrower’s tenure.
  • Interest Only Mortgage: Helps you buy more homes without any payments of principal initially. You actually begin making payments on your mortgage principal after the interest only payment is over which will eventually make your monthly mortgage payment balloon up considerably.
  1. Reverse Mortgages:  These are exclusively for those over the age of 62 with enough equity. Here, the lender makes monthly payments to the borrower for as long as the borrower is a tenant. The interest rate can be fixed or adjustable.
  1. 2. Two Step Mortgage: A 30 year residential mortgage with special convertible/ non convertible features: Popularly known as 5/25s and 7/23s, the 5/25s has a fixed interest rate for the first five years and then switches to either a 25 year fixed mortgage rate or a one year adjustable mortgage rate.
  1. 3. Federal Housing Authority (FHA) Mortgage: An insured residential loan determined by the median prices of different cities within a specific region.

There are a variety of loans to overcome the high initial value of the purchase:

  • FHA loans
  • Combo / Piggyback Mortgage Loan
  • Streamlined-K Mortgage Loans
  • Bridge / Swing Loans
  • Equity Mortgage Loans

The rates for a Mortgage Loan are generally calculated using a mortgage calculator, on the basis of criteria that range from the credit worthiness of the borrower to the period of payback   And for all those defaulters, thank heavens for the Mortgage Refinancing option that gives them a second chance to pay up a loan and in turn breathe a fresh lease of life.