Mortgages
Our team of experienced mortgage specialists is here to guide you through the entire process, ensuring you make informed decisions. Streamlined and user-friendly, our application process is designed to save you time and simplify your journey to home ownership. As a Hometown Bank customer, you benefit from the personalized service of a local bank backed by the strength and stability of an institution with over 125 years of experience lending to our community. From first-time home buyers to jumbo loans, Hometown Bank has the mortgage solution to fit you!
Fixed Rate Mortgage Loan
Lock in your interest rate for the length of the loan. Perfect for long-term goals.
Adjustable Rate Mortgage Loan (ARM)
Your interest rate will change (up or down) based on the index. Perfect for short-term goals.
Construction Loan Program
The loan that will take you from construction to permanent financing with interest-only payments during the construction period.
Fixed Rate Mortgage Loan
A fixed rate mortgage is a type of home loan where the interest rate remains constant throughout the entire term of the loan, providing borrowers with predictable monthly payments. Here are some key points about fixed rate mortgages:
- Stability: One of the primary benefits of a fixed rate mortgage is its stability. With a fixed interest rate, borrowers can rely on consistent monthly payments, making budgeting easier and providing peace of mind, especially in times of economic uncertainty.
- Predictability: Unlike adjustable rate mortgages (ARMs), where interest rates fluctuate according to market conditions, the interest rate on a fixed rate mortgage remains unchanged regardless of changes in the broader economy. This predictability allows borrowers to plan for the long term without worrying about sudden increases in their mortgage payments.
- Term Options: Fixed rate mortgages typically come with term options ranging from 10 to 30 years, allowing borrowers to choose a loan duration that best suits their financial goals and circumstances. Shorter terms usually come with higher monthly payments but lower total interest costs over the life of the loan, while longer terms offer lower monthly payments but higher overall interest expenses.
- Protection Against Rate Increases: Fixed rate mortgages offer protection against rising interest rates. Even if market rates increase significantly after the loan is originated, borrowers with fixed rate mortgages continue to pay the same interest rate agreed upon at the outset, providing insulation from potentially higher monthly payments.
- Refinancing Opportunities: While fixed rate mortgages provide stability, borrowers also have the option to refinance their loans if market interest rates decline significantly. Refinancing can allow homeowners to secure a lower interest rate, potentially reducing their monthly payments or shortening the term of their loan.
- Suitability for Long-term Ownership: Fixed rate mortgages are particularly suitable for homeowners planning to stay in their homes for an extended period. The predictability and stability they offer make them an attractive option for individuals looking to establish roots and build equity in their properties over time.
Overall, fixed rate mortgages are a popular choice among borrowers seeking certainty and stability in their housing costs. Whether purchasing a new home or refinancing an existing loan, fixed rate mortgages provide peace of mind and financial security over the life of the loan.
Adjustable Rate Mortgage Loan (ARM)
A variable rate mortgage, also known as an adjustable rate mortgage (ARM), is a type of home loan where the interest rate fluctuates periodically based on changes in a benchmark interest rate or index. Here are some key points about variable rate mortgages:
- Initial Rate Period: Variable rate mortgages typically start with an initial fixed-rate period, during which the interest rate remains unchanged. This initial period can vary but is often set for a period of 5, 7, or 10 years, providing borrowers with predictable payments before the rate adjusts.
- Interest Rate Adjustment: After the initial fixed-rate period, the interest rate on a variable rate mortgage adjusts periodically, usually once per year. The adjustment is based on changes in an agreed-upon index, such as the London Interbank Offered Rate (LIBOR) or the prime rate, plus a margin determined by the lender.
- Rate Caps: To limit potential payment shock for borrowers, variable rate mortgages often come with rate caps that specify the maximum amount by which the interest rate can increase or decrease during each adjustment period and over the life of the loan. Common rate caps include periodic adjustment caps and lifetime caps.
- Risk and Reward: Variable rate mortgages carry inherent risk and reward. While initial interest rates may be lower compared to fixed rate mortgages, borrowers face the possibility of future rate increases, leading to higher monthly payments. Conversely, if market interest rates decrease, borrowers may benefit from lower payments without needing to refinance.
- Suitability: Variable rate mortgages are typically suitable for borrowers who are comfortable with some level of uncertainty and are willing to accept the potential for payment fluctuations in exchange for lower initial rates. They may also be appropriate for borrowers who plan to sell or refinance their homes before the end of the initial fixed-rate period.
- Refinancing and Conversion: Borrowers with variable rate mortgages have the option to refinance into a fixed rate mortgage if they desire more stability or if interest rates rise significantly. Some lenders may also offer conversion options, allowing borrowers to convert their variable rate mortgage into a fixed rate mortgage at certain points during the loan term.
Overall, variable rate mortgages offer flexibility and initial cost savings for borrowers who are comfortable with the potential for payment fluctuations. However, borrowers should carefully consider their financial circumstances and tolerance for risk before choosing a variable rate mortgage, especially given the uncertainty surrounding future interest rate movements.
Construction Loan Program
Home construction mortgage lending involves financing the construction or renovation of a residential property and is a specialized financing solution for individuals looking to build or renovate their dream homes. While it provides flexibility and tailored financing options, borrowers should be aware of the unique requirements and responsibilities involved in managing a construction project alongside their mortgage obligations. This type of mortgage differs from traditional home loans in that the funds are released in stages as the construction progresses. Here are some key points about home construction mortgage lending:
- Customized Financing: Home construction mortgages provide borrowers with the flexibility to customize their homes according to their preferences and needs. Whether it’s building a new home from scratch or renovating an existing property, construction loans can accommodate various projects.
- Draw Schedule: Unlike traditional mortgages where the entire loan amount is disbursed upfront, construction loans typically have a draw schedule. This means that funds are released in increments, or “draws,” at different stages of the construction process, such as foundation, framing, and completion. Lenders may conduct inspections before releasing each draw to ensure that the work meets the agreed-upon standards.
- Interest Payments: During the construction phase, borrowers only make interest payments on the amount drawn. This allows for lower initial payments compared to traditional mortgages where both principal and interest are paid from the beginning. Once construction is complete, the loan converts to a traditional mortgage, and borrowers begin making full principal and interest payments.
- Shorter Terms: Construction loans typically have shorter terms than traditional mortgages, often ranging from six months to a few years. Upon completion of construction, borrowers may choose to refinance into a long-term mortgage or pay off the remaining balance.
- Higher Requirements: Due to the higher risk associated with construction projects, lenders may have stricter eligibility criteria for construction loans. Borrowers typically need a solid credit history, a sizable down payment, and detailed plans and cost estimates for the project.
- Builder Involvement: In some cases, lenders may require the involvement of licensed contractors or builders with a proven track record of completing similar projects. This helps mitigate risks associated with construction delays or cost overruns.
Find a Hometown Mortgage Specialist
Ready to take the next step towards home ownership? Connect with us today to explore the mortgage products that align with your goals. At Hometown Bank, we’re dedicated to helping you find the perfect mortgage solution for your dream home.
