Looking to buy a home in Central Pennsylvania? Mortgage rates are at historic lows and there's a lot to attract first time home buyers this spring.  If you're curious about how home loans can be repaid, here's a summary of some common repayment options:

Fully Amortized Loans—The borrower pays a constant amount every month that goes towards both principal and interest.  The lender credits the interest portion before the principal, meaning that over time, more of the payment is applied toward the principal.  This is the most common type of loan and it is long term.  They run for 15 and 30 years.

Adjustable-Rate Mortgage—ARMs are made at one interest rate, but over the term of repayment, they fluctuate up or down based upon an economic indicator called an index.  ARMs usually have rate caps that limit the amount the rate can increase, while payment caps set a maximum amount for individual payments.  The adjustment period identifies how frequently the rate can change—e.g. monthly, quarterly, or yearly.

Interest-Only Loan—Borrowers only repay the interest on the loan, meaning they’re not repaying any of the principal and are expecting to build equity in the home from the strength of the marketplace.  While you benefit from relatively low monthly payments, you risk that your property will not build equity as anticipated leaving you with a large loan to repay.

Balloon Payment Loan—These are considered partially amortized loans because at the end of the term, the borrower still owes principal.  The final payment is called a balloon payment because it is usually much larger than all the others. 

Growing Equity Mortgage—GEMs are also called rapid-payoff mortgages because payments of the principal increase over the repayment period allowing the loan to be paid off more rapidly.  They have fixed interest rates.

Reverse Annuity Mortgage—RAMs are unique because payments are from the lender to the borrower and are based on the equity the homeowner has in their home.  This is a popular choice among senior citizens on fixed incomes.  The property is given as security for the loan upon the death of the borrower.       

If your looking for personal service and have questions regarding loans, be sure to connect with one of our mortgage specialists at www.homenat.com.  Home National Mortgage has local offices serving all of Lancaster, Lebanon, York, Hershey, Harrisburg, and Cumberland County PA.