Lending

MG Financial Services

Mortgage Division of Michael Green Realty and Investment

As a buyer seeking a loan for your purchase or a borrower seeking to refinance your current home, there are many types of loans and lending options to choose from. It can be quite difficult for the general consumer to make a quick decision as to what loan is in one’s best interest. Our goal is to eliminate the difficulty in the decision making process. Below is a short description of loan types. However, it would be quite prudent to discuss at length, with your loan representative, just what program would meet your needs best.

Loan Types

30 year fixed/ amortized

The traditional mortgage plan is one in which one pays for a pre-set period of years on a mortgage debt and at the end of that period the debt is completely paid off. The period of payment can be any set number of years allowed by the lender. The norm is either 30 years or 15 years. This loan type is best for the individual who never plans to sell this property.

The word amortized refers to the fact that with each payment one makes, a portion of that payment is then applied to the principal of that loan.

Adjustable/Variable

This can be a very dangerous loan type as well as very beneficial. The difference depends on the person acquiring the property, their intention for the property and the length of time one intends to own the property.

Period Fixed Loans

These are loans in which they are quite similar to a 15 and 30 year fixed loan. The basic difference is that the pre-set term of the loan period is usually for 3, 5, 7 or 10 years. The loan is amortized for a 30 year period, but at the end of the term the loan will typically do one of two things: a) convert to an adjustable or; b) balloon.

Interest Only Loans

This loan type means that the borrower pays only on the interest assessed against the loan. This serves to save one about $250-$300 each month, based on a $300,000 loan amount.

This is an excellent plan for the individual who plans to move up in 3-10 years. Granted, no portion of the payment is applied to the principal, but the fact is that property values increase on their own. It is not by paying down the principal that one creates capital growth with real estate.

From a financial planning perspective, this loan type is a wiser use for the young home buyer and investor.

Pick-a-Payment Plans/ Neg-am

This is a very useful plan. But the neg-am or negatively amortizing feature is something to carefully be discussed with your loan representative.

HELOC

HELOC refers to “Home Equity Line Of Credit.” This loan type is acquired usually as a second trust deed. This plan is great to use as an investment tool or capital acquisition for home improvement or other cash needs.

Open and Closed end Seconds

These loan types are second trust deeds as well. It would be best to discuss this loan option with a loan representative as it pertains to your particular needs.

100% Financing

This is the acquisition of one or two loans to make a purchase. This enables the buyer, who qualifies, to need “no” cash for the down payment. However, there still may be need for money for the closing costs associated with the transaction.

Loans with PMI

Any loan or loan program, in which the first trust deed exceeds 80% of the value of the home, will require PMI (private mortgage insurance). PMI is an expense for an insurance that enables the buyer/borrower to acquire the loan.

Loans with regard to refinancing

Refinancing a home mortgage can be very useful to achieve several of the following goals:

  1. Consolidating consumer debt to acquire the opportunity to save money each month by eliminating monthly expenditures.
  2. Acquiring capital to further educational needs.
  3. Acquiring capital for an investment opportunity.
  4. Simply to reduce one’s monthly payment.