Mortgages in Florida | Loan Types

mortgages in florida

The state of Florida has the fourth largest population in the United States, and it is expected to keep growing. Tourists are attracted to the state due to its warm climate, its white sand beaches and its vibrant cities. For a long time, Florida has been an ideal place for vacation homes, principal residences and real estate investment. Currently, it may be a particularly good time to invest in Florida’s real estate market long term. The statistical data is showing Florida household prices are on the rise since 2011, and this trend is likely to continue.

Mortgage loan types obtainable in Florida

There are several options available for homebuyers in Florida. Depending on your needs, you can get the perfect mortgage package with the lowest down payment, the lowest interest rate, the lowest interest expenses or the lowest closing cost.

Fixed-rate mortgage

Fixed-rate mortgage remains the favorite option for Florida homebuyers. This is the most ubiquitous type of mortgage loan where the interest rate is locked and remains unchanged for the whole life of the loan (typically 15 or 30 years). Its primary advantage is that the home buyer does not need to worry about fluctuations which may affect interest rates in the long run.

Adjustable-rate mortgage

This option features the interest rate which remains stable during a set time period (usually between 1 and 5 years) and then gets adjusted depending on the market prices. People who understand the risks involved may still consider this as an option, but for most people this mortgage type may prove unsuitable due to exposure to higher payments after the initial teaser rate ends.

Federal Housing Administration (FHA) or Veterans Affairs loans

Home buyers who struggle to come up with a large down payment consider FHA an attractive option because the federal government highly subsidizes it. In fact, you may be able to purchase a home for putting as little as 3.5% of the house’s price down. However, this convenience comes with an additional cost as the home buyer needs to buy the Private Mortgage Insurance (PMI) which comes in two ways. The first is a lump sum payment of 1.75% of the house’s sale price which can either be paid on the spot or be included in the loan amount. The second is an additional insurance premium that gets added to the mortgage’s monthly payment.

Secondary mortgage loans in Florida

It’s worth pointing out, though, that lately it has been difficult to get such mortgages in Florida because many such loans ended up unpaid in the recent past. If it comes to a foreclosure, the amount of a secondary loan is typically smaller than that of the original mortgage, which implies a higher risk for the banks compared to expected returns. This implies that you’ll need a strong credit history to get approved for these types of mortgage loans.

Secondary Mortgage

Asking for a secondary loan on your Florida real estate property might be a smart choice, but it’s against the PMI terms, which only covers one mortgage (this means you cannot obtain a secondary mortgage on an FHA loan). Despite having a higher interest rate than the original loan, the payable interest on a secondary load is fully tax deductible, which may provide additional advantages.

Home Equity Line of Credit (HELOC)

If you want to access your real estate’s equity, this type of credit is perfect for you. HELOC is frequently used by people that need urgent funds for vehicle reparations or in their homes. With HELOC you will only need to pay the interest on borrowed money, just like it works with credit cards.