mortgages in usa

jane_4-2

Want to buy property in usa can anyone help with mortgage rules and regulations

vanoonoo

hi there - I imagine that you'll be mortgaging in the uk which means I think you'll get some good avice over on the mortgage board on this site - so I shall move this post there for you

Finishrich

jane wrote:

Want to buy property in usa can anyone help with mortgage rules and regulations

Where in the USA?

jane_4-2

hoping to buy holiday home in florida

DiggingOut

If you get a USA mortgage, last I knew, you had two basic options.

1. Fixed rate. This is a fix for the life of the loan. Unlike most fixed rates mortgages here, there are not usually any penalties for overpayment/prepayment.
2. Variable rate. These are usually lower rate, but without the security. Some of these may have an extremely low rate for six months (they call it a "teaser" rate), but those are usually less competitive over the longer term.

Variable rates there are somewhat different than they are here. They are usually tied to an index, like the one year Treasury bill, similar to a tracker here. Once a year, on a set date, the index will be valued and the rate resets.

Many variable rate mortgages have two kinds of caps. The first is an annual cap, which means that the rate can only go up by a set amount each year. Typically this is 2%. Some are 1%, but you probably won't get that. Although it is called an annual cap, it usually works both ways -- the rate won't go up more than 2% a year, but it also can't go down more than 2% a year. US rates have typically been more stable than here, so the annual cap doesn't usually come into play.

The other cap is a lifetime cap. This may be something like 6-8%, which means that the rate can only increase or decrease by that much during the life of the mortgage.

Most variable rate mortgages there do not have any prepay/overpay penalties.