The median home value in Daytona Beach is about $225,000, and home prices have appreciated more than 25% recently. If you are considering buying a home in Daytona Beach, or if you are planning to refinance or to take out a home equity loan, you need to understand the types of loans available to you.
Fixed Rate Home Loans
Whether you are purchasing, refinancing, or taking out a home equity loan, you can choose a fixed rate home loan. Most of the time, you will need a down payment, except for a home equity loan. This is variable, however, and there are home loan programs that do not require a down payment.
When interest rates are low, as they are now, a fixed rate home loan can be a wise choice. You do risk getting stuck with a rate that is higher than market rate if interest rates fall, though. Even half a percent change in your interest rate can make a difference of thousands of dollars in the overall cost of your home loan. Do your research and take out a fixed rate home loan when interest rates are low to avoid paying a higher interest rate later. A lender will also be able to advise you when it is best to take out a fixed rate home loan, so that you can count on predictable and stable payments at an affordable price.
Adjustable Rate Mortgages (ARM)
Home equity loans are usually fixed rates; although, you may be able to negotiate an ARM for yours. ARMs are more common with home purchase or refinance loans. An ARM has a variable interest rate, so it fluctuates according to the lending market.
An ARM is a wise choice when interest rates are expected to fall. It is a gamble, though, because if rates increase, so will your interest and your house payment. When interest rates go down, you can save a lot of money with an ARM. Before you choose an ARM, make sure you can manage the payments if interest rates increase.
Hybrid Loans
Hybrids are combination loans, with a fixed interest portion and a variable rate portion. Most hybrids today have an introductory period where the interest rate is fixed, and then the loan converts to an ARM later. This allows you to take advantage of low interest rates and payments in the initial period of the loan.
Many people take out a hybrid loan and either make large payments so that they pay the principle of the loan quickly, or refinance the loan before it converts to a higher interest ARM.
Interest Only Loans
This is a particular type of hybrid loan that is available to some people. The term of the loan is usually short, about ten years. You are only required to make interest payments throughout the life of the loan. You can pay any amount you want towards the principle. At the end of the loan term, the entire principle is due as a balloon payment.
If you are looking for a home loan in Daytona Beach, whether it is to purchase a home, refinance, or a home equity loan, we can help you find a lender. Please complete the form at the bottom of this page, and one of our representatives will contact you.
