What Are Mortgage Options Part 2

There many options for a home mortgage loan on the market. Some of these options are good, while some of them are not. Check into them before you make a commitment.

Simple Interest Mortgages – With a simple interest mortgage over a standard mortgage a homebuyer will more in interest. A homebuyer will pay on their home longer with a simple interest mortgage over a standard mortgage. The major difference is the way the interest on the loan payment is calculated. A standard mortgage the interest is calculated once a month based on the balance of the loan on the previous month. Where as the simple interest loan calculates the interest at a daily rate which adds to the next day and the next day and so on. With a standard mortgage the buyer has a grace period to make his payment which as long as the payment is made during the grace period has no effect on the calculations of the payment on the loan or the loan balance. With a simple interest mortgage the payment must be made on the 1st of every month or the buyer will pay more in interest for every day they are late. Homebuyers who make extra payments will do better with a standard mortgage over a simple mortgage. The only way a simple interest mortgage works out better with a simple interest mortgage is if the buyer consistently makes their payments early.

Portable Mortgage is a mortgage that can be moved form one home to another. Instead of repaying your mortgage when you move and then taking out another mortgage to cover the new home, with a portable mortgage you can transfer the old mortgage to the new property. As of now the only lender offering a portable mortgage is E*Trade. The major benefits to the buyer are that it avoids the cost of taking out a new mortgage. The cost of acquiring a new mortgage is offset with the cost of paying a 3/8 percent higher interest rate. The other benefit to a portable mortgage is that a buyer can avoid the rise in the cost of the mortgage rate that may be current on the market at the time of the transfer. Borrowers are unable to trade up by increasing the original loan, but the lender will give them a second mortgage at the market rate of the first mortgage. The borrower would still be subject to paying settlement costs on the second mortgage. Borrowers with the excellent credit required to qualify for a portable mortgage should be confident that they can maintain that record. Borrowers in bankruptcy or behind in their payments cannot exercise the transfer option.

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