Home is where the value is

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For most Americans, owning a home is part of the “American Dream”. It is also one of the largest expenses and biggest investments you can make in your life. It is very important to know your options and choose wisely when looking to finance your home or tap into the equity in your home. Here is a snapshot of the different types of mortgages and home equity products available to you as a homeowner or future homeowner.

Choose the Right Mortgage

Whether you’re buying your first home, or considering refinancing, it is important to know your options to see what the right fit is for you. The most common types of mortgages available are:

  • Fixed Rate Mortgage: This is the most common type of mortgage. It offers a fixed rate and payment for the life of the loan.
  • Adjustable Rate Mortgage (ARM): With an adjustable-rate mortgage, the initial interest rate is fixed for a period of time.  After this initial period of time, the interest rate resets periodically, at yearly or even monthly intervals.  Basically, the interest rate applied on the outstanding balance can vary throughout the life of the loan.
  •  Jumbo Mortgage: This is for mortgage amounts over $510,400.

 

Can’t afford to put 20% down payment towards your purchase?

Don’t worry; there might be options to help you:  

  • 80/15/15: This allows qualified applicants to do a simultaneous Home Equity Loan or Line to finance up to 15% of the down payment. This allows a borrower to remain with a conventional product and avoid Private Mortgage Insurance (PMI), which may be required in other programs when the down payment is less than 20% of the purchase price.
  • Government and State Agency Loans: One of these mortgages may be the right fit, as well. With support from Connecticut Housing Finance Authority (CHFA), Massachusetts Housing Finance Authority (MHFA), RIHFA (Rhode Island Housing Finance Authority), State of New York Mortgage Agency (SONYMA), Federal Housing Authority (FHA), and Veterans Administration (VA), you may qualify for one of these loan programs that can provide greater access to affordable homeownership opportunities.   

Utilizing your home’s equity

If you have owned your home for some time, improved it, or had a significant down payment at time of purchase, you may have accumulated equity in your home. There are two major types of products that can help homeowners get access to their equity.

  • Home Equity Loan: This offers a fixed rate and payment for the selected term.
  • Home Equity Line of Credit: This offers a revolving line of credit that makes money available to a borrower for when or if they need it. Rates typically vary with the prime rate, and interest-only payments are usually all that is required during the draw period, which is typically the first ten years.

What’s right for you?

Determining if a home equity product is right for you and which one is the best fit has a lot to do with your specific needs. Typically, if you are looking to purchase or pay off a fixed amount, a home equity loan may be the best fit. If you are looking to secure funds for things that spread costs over time, are for a future need, or simply to prepare for a possible future need, a home equity line of credit might be the best fit. Many banks, including Webster, will give qualified applicants access to up to at least 80% of their homes value, if they otherwise qualify. A discussion with a trusted Mortgage Banking Officer will help to determine the right solution for you. 

Rates are at historic lows

It’s no secret that rates for lending products like home equity loans, lines and mortgages are still at historic lows. That won’t last forever, though. NOW is the time to see if any of the available home lending solutions might be the right fit for you, including purchase programs to help anyone looking to become a homeowner.    Please call or stop by your local Webster banking center to see what solutions might be right for you and your family.

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General Disclosures

The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult professional advisors with regard to your individual situation.

Credit Disclosures

All loans and lines of credit are subject to credit approval.