Contrary to popular belief there is no perfect mortgage program. For some a 30 year fixed mortgage is right, for others an adjustable rate or interest only mortgage makes the most sense. At Monarch Mortgage we listen to your plan and suggest options. We will never make a decision for you, but rather share our expertise to help you make the best decision.
At Monarch Mortgage we represent hundreds of lenders and have access to just about every program ever thought of. Unfortunately we can’t list them all, but below are some of our most popular. These brief program descriptions are good to read prior to your consultation, remember at Monarch Mortgage we are not going to make you an expert on mortgages but we are going to make you an expert on your mortgage.
Interest Only & Interest First Mortgages
One Time Close Construction to Permanent Mortgages
A fixed rate mortgage is a mortgage in which there is one rate locked in for the course of a term, 15 years, 20 years, 30 years or 40 years. Each month a borrower makes a payment which includes both principal and interest. The repayment of the mortgage takes place on a sliding scale with each payment being broker into a portion toward principal and a portion toward interest. Typically the payment is weighted more heavily toward interest in the beginning and more heavily toward principal in the end. This repayment process is called the amortization schedule.
A fixed rate mortgage is well suited to someone looking at staying in a property for an extended period of time. It is also well suited to someone who likes the security of a locked rate. This is an extremely conservative mortgage program and offers the highest rates of any conforming loan option, although rates are very low right now from a historical stand point.
An adjustable rate mortgage (ARM) is typically repaid over a 30 year term but has a very unique feature to it which is that after a certain period of time the rate may adjust. An ARM is referred to by its term, 1/1, 3/1, 5/1, 7/1 or 10/1. The first number conveys the lock period, i.e. a 5/1 ARM is locked for five years. At the end of the lock period a typical ARM can adjust two points per year with a typical lifetime cap of six points. For example, a 5/1 ARM at 5% could change, in the worst case, to 7% in year 6, 9% in year 7 and 11% in year 8. It would never go higher than 11%.
In its initial description an ARM always seems like a bad idea, but remember there is no perfect mortgage program. Say, for example, that you were planning to purchase a house for $200,000 and live in it for five years and you were comparing a 30 year fixed mortgage to a 5 year arm. With today’s rates the 5/1 ARM would save you $123 per month or $7,380 over the 5 year period. Perhaps your spouse is in school and will start back at work in a year or two or you are anticipating a change in household income for some other reason but would like to purchase a house today, for all of the above reasons an ARM may be right for you.
Interest Only & Interest First Mortgages
An interest only mortgage is one in which there is no principal paid but rather only interest. An interest only option can be added to a fixed rate mortgage or an ARM and is available in various terms. An interest only payment is a significant savings over a traditional mortgage payment, for example, the savings on a 30 year fixed versus a 30 year fixed interest only on a $200,000 loan would be $180 per month.
The interest only mortgage is perfect for a self-employed or commissioned borrower. Your minimum payment is low but you when you have a good sales month you can make an additional payment to reduce the principal.
An interest first mortgage varies a little from an interest only in that in an interest first mortgage you pay interest only for a period and than principal and interest. Most 30 year interest only programs are interest only for the first 10 years and than 20 years of principal and interest.
One Time Close Construction to Permanent Mortgages
Monarch Mortgage’s one time close construction to permanent (C2P) programs are perhaps what we are best known for. A C2P loan is for a borrower who is interested in building a home and then paying that home off over time in a traditional mortgage. The C2P programs are available as fixed rate or adjustable rate mortgages and you can lock or cap your interest rate between the start of construction and the completion. During the construction phase you’ll make interest only payments as the funds are disbursed, upon completion your loan modifies from construction to permanent, there is not an additional closing.
Monarch Mortgage offers a wide variety of C2P loans including stated income and no down payment programs. You can typically roll in the cost of land, improvements, closing costs and of course construction cost. Construction lending is typically based off of the future value or appraised value of the home.
Home Equity Line of Credit (HELOC)
A home equity line is exactly what it sounds like, a loan which is secured by the equity you have in your house. Equity is the difference between what your house will appraise for and what you owe on it. There are numerous HELOC options, some available with little or no closing costs. Rates on these programs are typically based on the prime rate which can adjust as the Federal Reserve makes changes.
Monarch Mortgage’s HELOC’s are very aggressive, for example we can do a 100% stated HELOC. We also have programs which allow you to lock the rate, some of these programs even allow you to lower your rate if prime goes down.
HELOC’s allow you to take cash out of the equity you have in your home and use it to do debt consolidation or home improvements.
Perhaps you would like to purchase a lot that you will someday build a home on, perhaps you would like to purchase an additional property neighboring your existing lot or perhaps you own a lot and would like to refinance it to get cash out. For all of these a land only loan is right for you. Programs are available with down payment requirements as low as 5-15%.