Posts Tagged ‘fixed mortgage’

Adjustable or Fixed Rate Mortgage?

Choosing  Fixed or Adjustable Rate Mortgage Option.

One of the most important decisions a homeowner will have to make when deciding to re-finance their home is whether they want to refinance with a fixed mortgage, an adjustable rate mortgage (ARM) or a hybrid loan which combines the two options.

The names are pretty much self explanatory but basically a fixed rate mortgage is a mortgage where the interest rate remains constant and an ARM is a mortgage where the interest rate varies.

The amount the interest rate varies is usually tied to an index such as the prime index, or US treasuries. Additionally there are usually clauses which prevent the interest rate from rising or dropping dramatically during a specific period of time. This safety clause provides protection for both the homeowner and the lender.

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What Is A Jumbo Mortgage?

A jumbo mortgage is, as its name implies, a really big mortgage.

To be more specific, a jumbo mortgage is one in which the amount being financed is more than the top amount set by the Government Sponsored Enterprises, or GSE.  The GSE is a group of financial companies that is charged with maintaining access to housing loans and reducing the cost of those loans so that consumers are able to realize the goal of home ownership.

As part of their duties, the GSE sets a maximum guideline amount for a mortgage, which has traditionally been about $417,000.00. If a mortgage is for more than that amount, it is called a jumbo mortgage.

Of course, we all know that there are lots of houses that cost more than that, so the need for jumbo mortgages has been increasing as the price of housing has increased.

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