Mortgage - Today’s Risky Mortgages: Are they for you?
According to Deborah Fowles from About.com, lenders have created a whole new generation of mortgage to handle the rapidly rising home prices that can be reached by many people. If you an investor in real estate or planning to be an investor in future just like me, then I think her article “Today’s Risk Mortgages: Are they for you?†is a must reading for you. It will let you roughly know what happen in the market and what kind of mortgage appear and option that you might have.
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- Option-Payment Mortgage
- riskiest mortgage
- you can choose what to pay every month : principal + interest, interest or a minimum payment.
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Danger : You debt might get bigger.
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- Interest only Mortgage
- second riskiest mortgage
- you only pay interest for 3 to 10 years
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Danger : You might be not able to afford those payments after the only-interest period.
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- Low-Doc Mortgage
- as risky as interest only mortgage.
- You can get the loan without any qualification proves.
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Danger : You might get a mortgage that you can’t afford
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- Piggy-Back Mortgage
- less risky
- The piggy back loan involves taking out two mortgages: a home-equity loan or line of credit for 20% of the home’s value, which you use as a downpayment to avoid having to pay private mortgage insurance, and a primary mortgage for 80% of the home’s value.
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Danger : The risk you might forced to sell your house less than what you owe.
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- 40-years fixed Mortgage
- the least risky mortgage
- Fixed-rate mortgage that you pay it off over 40 years.
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Danger : You might end up paying a lot more for the hose and it will take a very long time to build any equity.
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Source : About.com