Types of Montana Mortgage Loans

Lenders have, in the last several decades, come to tailor the mortgage to suit the wide variety of credit and personal needs of their consumers. No longer are persons interested in property limited to a standard 30 year, fixed rate mortgage, in fact the menu of loan options has grown so large, it is hardly likely you'd find a single web page listing all of them with any level of informational detail. Some mortgage plans are of a standard format while others may be a customized combination of loan types that is negotiated by you and your lender. Not all lenders will offer every type of loan available, so if there is a specific one that interests you, be sure to speak with them about whether they carry it and what their terms are.

Changing Your Loan Term Length

A new, popular feature of mortgage loans, especially among younger homebuyers is the 15 or even 10 year mortgage. These loans typically come at the same interest rate as longer term loans but due to the very short payment terms, they have much higher monthly mortgage payments due, but in the long run considerably less interest is paid to the bank, so instead of paying nearly 100% of the home's value in interest over the life of the loan, a short term loan will pay significantly less to the bank for the loan. These types of loans require a good credit history and a high income sufficient enough to meet the higher monthly payments.

Another alternative to the standard 30 year loan is to increase the loan term length to 40, 50, or even 60 years. While the longest of these loans can almost literally represent a lifetime of payments, the payment amounts will generally be very small when it comes to the monthly mortgage. This can be appealing to those with a low income who have no real hope of ever increasing it anytime soon (such as those living on fixed government assistance). The other appeal for this loan type would be to get a long term loan at a fixed rate due to low income now that you expect to increase in the future, enabling you to refinance your loan to a shorter term.

Adjustable Rate Loans

Another popular type of loan is the adjustable rate loan, which is a mortgage that starts off with a fixed rate and then, after a certain period, the interest rate (and your monthly payment) begins to fluctuate based on certain market conditions. While it is possible to take great advantage of an ARM loan in order to get even lower monthly payments, this rarely happens since the loans usually start off with a very low interest rate right from the beginning.

One common strategy for new home buyers is to get an adjustable rate loan to take advantage of the low interest rate at the beginning of the loan, and then refinance their loan before the interest rate begins to fluctuate. If this is your plan, proceed with caution and make sure you guard your credit score carefully, or else you may end up with insufficient credit to convince a lender to refinance the home for you. Another possible downside to this strategy is home values - if you find yourself upside down in your house payment (owing more on the house than it is worth), then you will be very unlikely to find someone to refinance it for you.