Types Of High Risk Mortgage

Types Of High Risk Mortgage



Types of​ High Risk Mortgage
As the​ cost of​ houses continues to​ increase,​ fewer people are able to​ afford them .​
Many creditors have responded to​ this situation by creating a​ new class of​ mortgages that are quite risky .​
a​ large number of​ people have begu​n getting these mortgages,​ and the​ payments are generally low when you​ first get the​ loan .​
In this article I​ will discuss these mortgages in​ detail,​ and what you​ should know about them.
Option Payment Mortgage
The most risky mortgage option available today is​ the​ Option Payment Mortgage .​
With this mortgage you​ decide how much you​ want to​ pay each month .​
You can pay either the​ principle,​ interest,​ or​ minimum amount allowed by the​ creditor .​
The danger with this type of​ mortgage is​ that you​ could end up paying more money than your home is​ worth .​
Those who fee that they are responsible with their personal finance should only use this mortgage.
Interest Only
The second type of​ risky mortgage is​ the​ Interest Only Mortgage .​
As the​ name implies,​ this is​ a​ mortgage with which the​ borrower pays interest on​ the​ loan for a​ set number of​ years .​
This could be ten years,​ and at​ the​ end of​ the​ ten years the​ borrower would begin making payments on​ the​ principle .​
The risk with this mortgage is​ that the​ payments for the​ principle will be much larger than the​ interest,​ and the​ borrower may not be able to​ afford it .​
The mortgage companies and banks win because the​ borrower has already spent years paying on​ just the​ interest without touching the​ principle.
The Interest Only Mortgage should only be used in​ either a​ situation where you​ are 100% certain you​ will make enough money to​ make the​ principle payments,​ or​ you​ don't plan on​ living in​ the​ house after the​ interest has been paid .​
a​ Low Doc mortgage is​ one in​ which you​ are loaned money despite your qualifications .​
The danger with this mortgage is​ that the​ borrower may take out loans,​ which they can't afford .​
You should only get a​ Low Doc Mortgage if​ you​ are making a​ large enough income to​ pay it.
Piggy Back Mortgage
The Piggy Back Mortgage is​ a​ type of​ loan in​ which two mortgages are taken out which equal over 15% of​ the​ value of​ the​ home .​
This percentage is​ paid towards the​ home in​ order to​ avoid paying for mortgage insurance This can be risky,​ because if​ the​ value of​ your home falls you​ will have to​ sell it​ for a​ price less than what you​ borrowed .​
you​ also don't have any equity that can be used to​ protect you​ .​
This mortgage should only be used when you​ have a​ large down payment but want to​ avoid paying for mortgage insurance.
Long Term Fixed Mortgage
The last type of​ risky mortgage is​ called the​ Forty Year Fixed Mortgage .​
With this loan you​ get a​ fixed interest rate,​ but will pay off the​ loan over a​ period of​ 40 years instead of​ 30 .​
Your payments will be lower,​ but it​ will take a​ long time to​ build up equity in​ your home .​
The main risk with this mortgage is​ that you​ may end up paying a​ lot more for your home over the​ long term .​
Now that banks are allowing just about anyone to​ get a​ home,​ it​ is​ important to​ make sure you​ protect yourself.
Only Buy What you​ Can Afford
You should never get a​ mortgage on​ a​ home that is​ outside of​ your price range .​
You should look and your income and decide what you​ can afford .​
If you​ get an​ Adjustable Rate Mortgage you​ should calculate how much your payments will be monthly in​ the​ interest rate suddenly increases .​
It is​ generally best to​ go with a​ mortgage that has a​ fixed rate.




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