Know Your Mortgage

The question of whether or not you know your mortgage is an important one especially when it comes to the possibility of a mortgage in default and possibly even foreclosure. Knowing what kind of mortgage you have will tell you a lot about your ability to prevent a pending foreclosure. Some loans are fixed in both the payments as well as the rates while others fluctuate in the rates and still others the payments may increase throughout the term of the loan or decrease.

Usually you can tell simply by looking at your mortgage contract but in the event that you cannot, you may want to contact your lender just to be sure of the mortgage type.

1) A Hybrid Adjustable Rate Mortgages which is usually called an ARM mortgage is one which usually has fixed payments over the first couple of years, and then become an adjustable loan. These mortgages come in a number of fashions and are usually accompanied with numbers such as a 2/28 or even a 3/27. In these mortgages, the first number will refer to the number of years the loan will be set at the fixed rate while the second number refers to the number of years that it will be an adjustable rate. Furthermore, you may also see some that are listed as 5/1 or even 3/1 in which case the first number once again refers to the number of years that the loan is fixed while the second number is that of how often the rate will be changed.

2) An ARM or Adjustable Rate Mortgage is one which offers an adjustable rate from the very beginning. With this type of mortgage the payments are continuously changing usually on a yearly basis.

3) Finally you have the fixed rate mortgage which is of course the most common type. With these types of mortgages the payment is fixed at an exact amount and the only time in which the payment amount can change, is when the taxes on the mortgage or the insurance changes in the event that you have an escrow account with the lender.

If you are facing a pending foreclosure and you have an ARM or even a Hybrid ARM which is now in it adjustable years, then perhaps you should look into the possibility of refinancing the mortgage in to a fixed rate one which may be a bit more affordable. However, you need to take into account that with the vast majority of ARM mortgages, you will have a prepayment penalty which will require you to pay several thousands of dollars in order to refinance the mortgage depending on home much is left to pay on the term.

If you are behind on your mortgage payments and are worried about the possibility of being in default and having to face a foreclosure, then you should take the time to speak to your lender about possible foreclosure prevention programs that may be available to you.

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