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What are the other ways of home-financing than paying more in a 30-year mortgage


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At this time, it is common that a potential home-buyer would choose a 30-year fixed-rate mortgage. Freddie Mac, one of the biggest mortgage tycoons have explained it as the most popular home loan option. Since last two years before 2014, majority of the homebuyers (approx 85% in 2012 and 90% in 2013) have chosen 30 year mortgage plan as their home financing tool. So, basically it is the most traditional way of taking home loan.

But if you somehow want to let go the traditional route and to find some other ways to fulfill your dream, here goes some alternatives which can be as helpful for you as a 30 year mortgage.

5 alternate financing options you wouldn't try to miss

1) Cash payment option – The most fascinating thing about cash payment is, you do not have to bear a single penny more towards your home. You will not pay any interest rather than just paying the purchase price and the related small costs. Don't feel hesitated if you can't afford to pay in cash. Its a common thing that most of the people doesn't want to use cash to afford big investments. But in recent stats, it seems that new buyers are liking this payment option quite a bit. As per the Greater Las Vegas Association of Realtors, 43% of homes are bought in cash. Not only that, 1/3 of total home-buying was made in cash deals in 2013.

So, definitely buying home through cash deals is a quite lucrative idea. But you need to focus on saving plenty of excess money also to use it in an emergency.

2) 15-year FRM - According to the experts, the 2nd best option will be 15-year FRM (Fixed rate mortgage). It has some pros and cons also. You'll have to pay greater monthly installments in this program. But the good thing is that the rate of interest will be lower than 30-year mortgage by 1% to 1.5%. The rate will be fixed during the entire loan term. So, you'll be paying the loan much faster and your home equity will rise too. Your home equity can help you to borrow another loan within short time.

3) 20-year FRM – It has the same characteristic like 15-year mortgage. But it has some differences which makes it more affordable to the borrowers. It has lower amount of monthly payments than a 15-year FRM, but with a slightly higher interest. You'll be paying more at the end of loan term, despite of that fact some borrowers make their selection.

4) 50-year FRM – Normally professionals would recommend you to stay away from this option. Lenders can offer these loans, but it is considered risky for both the parties, borrower and the lender. Borrower have two benefits from it, fixed interest rate and a larger time frame to pay off the loan. But they would also bear a higher rate compared with other plans. So, at the end they will be paying way more than they can imagine. Its kind of paying rent to bank for living in your home.

5) 5/1 ARM – This is a very good option for those homebuyers who wants to live in their house for a short period of time. 5/1 ARM (average rate mortgage) comes with variable interest rates. For the first 5 years your interest will be lower and fixed. After that till 25 years your rate of interest may fluctuate according to the market index. After 5 year of low payments, your monthly installments will have a raise and it might not be possible for you to afford that much burden. Initially you will save way more than any mortgage plan, but later it will be hard to balance your finances.

Basically, you'll have many affordable payment options according to different situations. But if it comes to selling your home by any chance, don't hesitate to do it. Due to the different mortgage plans and higher payments, you might not get the chance to originate much equity against your home. So, you can have a better option if you can sell the house and pay off your mortgage debts as soon as possible.

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