What You Need to Know About Growing Equity Mortgage Info
Buying a home for the first time can seem like a confusing process, especially when it comes to financing. And on that note, today we’ll expand on growing equity mortgage info.
There are many different loan and mortgage options to choose from. Some are very common in the market, while others may be particular to specific cases. These include Veteran’s loans or benefits for those interested in energy efficiency.
However, there is one option that really stands out for first-time buyers – let’s dig in to some growing equity mortgage info.
It’s not hard to understand the way this mortgage works, and we have all the basics you need to know.
What Is a Growing Equity Mortgage?
A growing equity mortgage is a set schedule of payments which increase over time.
The first few payments go directly to interest, as can be expected with amortization. Amortization is the process of paying off debt with a fixed schedule, in which case interest payments lower as principal payments increase over time.
For homeowners, every time the monthly amount goes up, more money is applied towards the principal rather than interest. This saves a number of interest payments in the long run because there is less principal to apply it to.
Buyers can also increase their planned payments to further improve a mortgage balance.
Who Is Eligible for This?
Low and moderate-income families are the biggest demographic of growing equity mortgage applicants.
These are people who have likely been turned away from another home loan option. Many times, a lender is risk-averse when reviewing applicants with little to no history of making stable credit payments on something like a car or previous home.
The option to start with small monthly payments is a sign of good faith for both parties.
It lets borrowers move into a home quickly, which means they can focus on getting financially stable to make the required payments. As such, lenders tend to breathe easier and trust their borrower will follow through because they have the time to get funds together.
What Are the Benefits?
The most recognizable benefit is the ability for many first-time homeowners to buy a house sooner than expected.
A growing equity mortgage opens doors which are otherwise shut for people with little credit history, or worse, negative history. It allows them and their families to get settled and better prepare for the future.
The anticipation of increased payments often keeps families on track for mortgage success. This is largely due to the fact they can ease into large payments over time.
Plus, paying off this kind of mortgage gives owners faster access to the equity in their home. Many times, they will pay off a mortgage sooner than normal, giving them the opportunity to borrow against the home’s equity if needed.
Understanding the Mortgage Process
The mortgage process is not cut and dry.
All the different options available should be assessed on a case by case basis in order to best match potential buyers and lenders.
Choosing the right mortgage depends on your credit history, current financial standing, projected earnings for the future, and more.
No matter where you are in your home-buying process, educating yourself on mortgage options can be of great benefit.
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