Question : What is the best home loan for a short term mortgage?
It is for an investment property and I am only planning on holding on to it for 3-5 years. What is the best home loan available with the lowest payment without any differed intrest?
- asked by Tom W
All Answers:
Answer #1
Types of MortgagesHow much house you can buy alsodepends on your mortgage's term and interest rate.The term is the length of time (usually 15 or 30years) over which payments will be paid. The ratecan be fixed (meaning it doesn't change over theloan's term) or adjustable (it fluctuates withmarket conditions). Thirty-year fixed-ratemortgages remain the most popular. The longer termlowers the monthly payment, while the fixed rateprovides stability over the life of the loan.Given relatively low interest rates, thesemortgages are attractive to buyers planning tostay at least six or seven years in their newhome. The drawbacks are low principal payments inthe early years, and the risk that market rateswill decline over the term. However, if yourcredit history is sound and you have sufficientincome, you can usually refinance your mortgagewhen rates decline.A 15-year term lowers theinterest rate, reduces total interest payments,and increases principal payments. But it alsoincreases monthly payments. If you can't affordthe higher payments now, you might opt for a30-year mortgage. If there are no prepaymentpenalties, you can make additional principalpayments as your income increases. Making just oneextra monthly payment a year will pay off a30-year mortgage in less than 22 years and cansave tens of thousands of dollars in interestcosts. If you plan to stay in a home no more thanthree years, you might want an adjustable-ratemortgage (ARM). ARMs offer initial rates that arelower than fixed mortgages. At some point, usuallyafter the first year, rates are tied to marketconditions and are subject to potential rateincreases. Most ARMs include a cap on rateincreases in any given year, as well as over thelife of the loan. Some ARMs offer initial rates atleast 2% below fixed rates and limit increases to1% annually and 5% to 6% over the life of theloan. Many home buyers are attracted by theaffordability of an ARM during the initial period.However, you should be confident that your futureincome will be sufficient if both interest ratesand your monthly payments increase. Anotherpopular mortgage involves a balloon payment. Aballoon is a lump-sum payment that pays off theloan in full after a fixed period of time.Generally the rates on balloon mortgages are 1/4%to 3/4% less than on 30-year fixed mortgages, butduring an initial period of between 3 and 15years, payments are similar. After this period,the remaining outstanding principal balance iseither due in full or subject to refinancing. Thisis a good option for home buyers who plan to sellbefore the final payment is due. But becauseproperty values fluctuate, you may not be able tosell when you want. You may also face higherpayments if you are forced to refinance at ahigher rate, and there is also a risk that you maynot be in a position to refinance when the balloonbecomes due. Three Steps to Finding the RightMortgageEstimate how long you expect to live inthe house. If the answer is less than three tofive years, consider an Adjustable Rate Mortgage(ARM), which typically starts out with a lowerrate. If you plan to live in your new home longerthan five years, a fixed-rate mortgage offersprotection against rising interest rates. Shoparound for mortgage rates. Banks, credit unions,and mortgage companies all offer mortgages.Compare at least six lenders in your area. Add upall the costs for each lender. Include fees,points, closing costs, etc., to arrive at thetotal mortgage cost for each lender.
- answered by lil_butterfly_girlie
Answer #2
the very BEST loan is the one you can alwaysafford...talk to your local banks and financialinstiturions.in todays market you want to stayaway from ARMs (adjustable rate mortgages)...themonthly payments will start to climb and beforeyou know it the monthly payment will be out ofyour reach and you will be in a foreclosure.thisis what is happening all across america rightnow...forclosures are up up up due to ARMs.stickwith your local financial inst. and 30 yr fixedrate no prepay penalty (20% down)....this shouldbe good..if your credit is good enough you willget a low rate.good luck :)
- answered by Business Mom
Answer #3
If you only plan to hold the property for 3-5years, they do have ARM programs that last 5years. Meaning you get a low introductory ratefor 5 years, then the adjusts, generally based onLIBOR, every 6 months to one year, with a cap onhow high it adjusts. It will never adjust duringyour initial ARM period, and if it looks likeyou've decided to hold on to the property, you canrefinance into a fixed rate before the ARM rateexpires.You're the perfect example of when an ARMloan is a good choice--as opposed to the ARM loansgiven to subprime lenders that are defaulting.
- answered by Ari
Answer #4
I would look into a 5/1 interest only. Just makesure there are no pre-payment penalties on theloan if you decide to sell before the 5 years areup.
- answered by tianaramal
Answer #5
mortgage is a loan that is taken for buying ahouse or a property by using the same property ascollateral. Home mortgages are very common in manycountries, and are generally used for buying ahouse. Taking a mortgage allows the borrower todefer the payment of the house for a few years.The borrower has to pay a part of the principaland some amount as interest every month to thelender. Home mortgage refinancing is an optionwhere the borrower exchanges one loan for another.He can sell off the loan, or a part of the loan,and take another loan at a lower rate of interest.This is an effective way to reduce the burden fromexisting loans. Home mortgage refinancing isideal when the current interest rates are lowerthan the rate of interest on the existing loan.With increasing real estate prices and moreoptions for mortgage loans at lower prices,refinancing is increasingly being considered as anoption by many borrowers. There are severaladvantages to home mortgage refinance loans apartfrom the lower interest rates: lower monthlypayments, conversion of an adjustable ratemortgage into a fixed rate mortgage or a long-termmortgage into a short-term mortgage, consolidationof debt and generation of additional cash that canbe used for home improvement, which would increasethe value of the house. With refinancing, theborrower can save hundreds of dollars everymonth.Refinancing can be ideally considered whenthe current interest rates are at least 2% lessthan the rates on the loan. However, even a 1%difference can mean significant savings. There arecertain aspects to be contemplated whileconsidering home mortgage refinancing: the valueof the house may actually come down, instead ofgoing up, thus making repayment difficult; therecould be additional costs of refinancing; or youmay have to move out of the house sooner thanexpected. Home mortgage refinance costs includeapplication costs, appraisal costs, and legalfees. Nevertheless, with increasing competition,most lenders are offering low-cost and no-costrefinance options for home mortgages. However,waiver of these costs may mean accepting aslightly higher interest rate.Home mortgagerefinance loan rates are different in differentstates and range between 5.875% and 6.375% orhigher, depending on the kind of loan.
- answered by Robin L
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