What type of mortgage do you have?

One of the first steps you need to take in order to get mortgage or foreclosure help is to know what type of mortgage you have. Are your mortgage payments going to go up? You need to review the mortgage documents that you received at your closing or settlement. If the documents are too complicated to understand, you should contact your mortgage loan servicer and tell them you need some help understanding your mortgage. Note that the loan servicer is not always a bank. The loan servicer is the company who sends you your monthly bill and they are the same company who is responsible for collecting your monthly loan payments.

Here are just a few examples of the different types of mortgages:

ARMs: These are loans that have an adjustable rate. What this means is that the amount of your monthly payment will definitely change over time, and it may go up or down depending on the contract and future interest rates. More often than not though your interest rate will increase.

Fixed Rate Mortgage Loan: these are mortgages in which interest rate is fixed for the entire term of the loan.

Hybrid Adjustable Rate Mortgages: These are mortgages that are a combination of the above. They will have a fixed interest rate and payment for a defined period of time, which is usually a few years. At some future date the mortgage will turn into an adjustable rate loans (ARM). It has turned out hat these are the most common type of mortgage that consumers need help paying in today’s economy. These loans will have a number such as 2/28 or 3/27. The first number in the sequence, whatever it is, will refer to the number of years the loan has a fixed interest rate for. The second number in the sequence refers to the number of years the loan has an adjustable interest rate for.

But some loans may have a different numbering sequence. This sequence will be 5/1 or 3/1 hybrid ARMs. For these type of loans, the first number is the number of years that the loan has a fixed rate for. The second number in this sequence is how often the interest rate will either increase or decrease. For example, in a 3/1 hybrid ARM the interest rate is a fixed rate for a period of time of three years, and then it will adjust annually thereafter.

You should determine if you can refinance your current mortgage into a fixed interest rate loan. Spend some time reviewing your mortgage contract to determine if you have a prepayment penalty as unfortunately many ARMs do have these prepayment penalties that will force homeowners to pay hundreds or thousands of dollars if they attempt to refinance within the first few years after the mortgage was originated. It often turns out that if you are planning to sell your home after a refinance, refinancing your mortgage and making that payment may not be worth the cost to change into a low interest loan. On the other hand, if you are planning to continue to live in your home for an extended period, a fixed-rate mortgage refinancing may be the way to go.

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