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Bad Credit Mortgage Loans

Did you just find the house for your dreams? You do not need the mortgage of your dreams to afford it or even the credit rating for your dreams. Getting a new home mortgage, refinance your existing mortgage or get a home equity loan to consolidate your debt.

Getting a mortgage is one of the most important decisions of your life and goes hand in hand with picking out the house that you are to call your own. Mortgages last a number of years so it is important to find a good one that will maximize your house s value over its life.

What exactly is a mortgage? A mortgage is a loan in which you use the house you are purchasing as collateral for the loan you are getting to pay for the house. In a mortgage loan agreement you are the mortgager and the creditor is the mortgagee. If you default on your payments the creditor claims legal ownership of your house. Mortgages are paid off using a method called amortization. In the early years of the loan you will pay mostly the interest on your mortgage and in the later years you will pay mostly the capital (the actual loan amount) on the mortgage. You can also get an interest only loan in which for the first few years you only pay interest. If you have a five year interest only mortgage on a 30 year mortgage, after the first five years the capital will be readjusted for you to pay over the final 25 years. You will end up paying more in the final 25 years but it could be worth it for paying much less for the first five years.

Interest rates are a major factor when it comes to figuring out what the right mortgage is for you. There are two main types of interest rates:

  • Fixed Rate Mortgage (FRM) – Fixed rate mortgages are self explanatory; the interest rate is fixed for the life of the mortgage and will never change. This is nice because you will always know what your interest rate is and you do not have to worry about it going up. You will have to pay for this security, however. Usually fixed rate mortgages come with higher interest rates.
  • Adjustable Rate Mortgage (ARM) – This is the opposite of a fixed rate mortgage. You rate is adjustable; it will never be one set rate. The interest rate is based on a market interest rate. Usually these interest rates start out lower then fixed rates so you can pay less in the beginning of your loan. However there is always the risk they can increase and you will end up paying more. It is a little bit of a gamble, but like all gambles they can turn out well.

Different Types of Mortgages

There are various things you can do with mortgages. The starting point to all of these is a new mortgage. However, you can also refinance and take out a home equity loan. These are all different types of mortgage options:

  • A new home mortgage is the starting point. This is where you decide what type of mortgage you should get, what the interest rate is going to be, whether part of it is interest only or not. Usually new home mortgages are either 15 years or 30 years. It can seem daunting making a decision that can haunt you for that long of time but do not worry there are always options down the road if your current mortgage is not going so well.
  • Refinancing your mortgage is the way to go if you current mortgage is unsatisfactory. Maybe your interest rates are too high, maybe you should not have chosen a fixed mortgage rate, maybe your monthly payments are just too high. This is your second chance. You can extend the length of your mortgage if you want to lower your monthly payments. If you really need to change from an ARM to a FRM or vice versa then you should probably refinance. Mortgage refinancing is incredibly common in today s marketplace; a lot of people seem to be refinancing their mortgage in the first few years of their mortgage.
  • Are you finding your self in up to your neck in debt? A home equity loan may be your best option to get out of debt. With a home equity loan you take out another loan on your house to help you pay off your debt. How can taking out another loan help your debt? Isn t that what got you in this mess in the first place? That is not the case this time around. Home equity loans have smaller interest rates which help you pay it off more reasonably. You can use these loans to help pay off all kinds of debt, they are very popular today.

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