The Vast Array of Today’s Mortgage Loans – taux hypothecaire

Just as the stock market and the commodities markets have become more and more complex with derivatives, options and other products, the mortgage market has become complicated as well – taux hypothecaire. If you are shopping for a mortgage today, don’t expect that the only one you will see is the normal fixed rate, thirty year mortgage that grandpas had in the old days.
One of the first reasons is that we do not live the lives of our grandfathers; people today are both physically mobile and socially mobile. We change jobs more often, and so we have to change homes and we like to move to bigger and bigger residences as we earn more and more income.
Home loans have also become more complicated because competition has spurred mortgage lenders to come up with even more innovative products.
Following is a short list of the new kindstypes of mortgages that today’s borrowers will be faced with. Grandpa and Grandma were lucky.
Conventional loan: This is a mortgage that has no government guarantees.
Government loan: Any loan that is either guaranteed or managed by one of the federal or state agencies.
Conforming loan: Adheres to the conditions that have been set by the two main government supported entities (GSEs), Fannie Mae and Freddie Mac. There are also referred to “A” paper mortgage loans.
B.C loan: Any conventional loan that does not conform to the terms and conditions of Fannie Mae and Freddie Mac Loans of this type are usually granted to people who do not have good credit, for example people with recent bankruptcies or foreclosures. They are used as temporary financing for applicants like this.
Jumbo loan: Fannie Mae and Freddie Mac fix the highest values on the loans that they will guarantee; jumbo mortgages are above those values. Such loans have a higher interest rate as a rule, since there are not enough of them to make for a very liquid market.
Fixed rate loans: This is the traditional loan such as grandpa would have had-fixed term, fixed rate. With a fixed rate mortgage, the rate and term are fixed at the beginning and the mortgage amount never changes. Fixed rate mortgages are available for 10, 15, 20, 25, 30 and 40 year terms, but the 15 year and 30 year terms are most common. Normally, the shorter the maturity of the mortgage, the lower the interest rate, since the bank is not taking as great a risk on the movement of interest rates.
Balloon Loan: A loan with a set rate and set monthly payment, but shorter terms than a fixed rate loan. Balloon loans have lower interest rates, but a sizeable risk of higher rates when the whole loan has to be paid off at maturity.
Adjustable Rate Loan: Banks prefer to avoid fixing loans for maturities too long because interest rates can increase, so they now deal in ARMs (Adjustable Rate Mortgages), that have interest rates that adjust periodically, based on a given index such as Treasury Bills or Certificates of Deposit.
Within each of these kinds of loans, there are many variations, allowing both banks and consumers a level of choice and flexibility that has never been seen before. This makes the mortgage market even more complicated and fraught with problems for the typical consumer, who should consult with a mortgage professional before he makes a decision.