Sept. 24, 2012
-- When it comes to hybrid mortgages, borrowers have several options to choose from – piggyback mortgage, option ARM mortgage, mortgage buydowns, and others. A piggyback mortgage is one type whereby the borrower has taken a mortgage or refinances it, simultaneously applying for a home equity loan or second mortgage. Most financial institutions require that the borrower purchases mortgage insurance or makes a 20 percent down payment. Not all borrowers can come up with money for the down payment while buying mortgage insurance is seen as an unnecessary expense. One solution is to apply for a piggyback mortgage and borrow against the down payment.
The option ARM mortgage is another type of loan that offers borrowers different payment options. These include a 30-year and 15-year fully amortizing payment, an interest-only payment, and a specified minimum payment. This type of mortgage is complicated in that interest accrues. The portion that is left unpaid is added to the principal (negative amortization)
. Borrowers who opt for an option ARM make low payments during the first year. The payments may increase considerably once the initial period is over. This mortgage is a good choice for people whose incomes fluctuate and those with high or growing incomes.
Mortgage buydowns are another variety and a good choice for people seeking to make payments at a lower interest rate. They can pay a fee to reduce the interest rate over a certain period of time. The mortgage payments cover the interest and the principal balance. Finally, there is the adjustable-rate mortgage whereby the interest rate fluctuates, going up or down on an annual, semi-annual, or monthly basis.
Apart from hybrid types, borrowers can opt for conventional loans or special mortgages such as swing loans, reverse mortgages, equity loans, and others. http://www.yourloan.ca/