Question

Select 2 different loan programs/types and summarize the important points you would need to communicate to a potential borrower. (some examples: interest only loans, home equity loans, loans with a balloon feature, revers mtg)

Answer 1

Two different loan programs/types that borrowers should be aware of are interest only loans and home equity loans.

Step-by-step explanation:

Two different loan programs/types that potential borrowers should be aware of are interest only loans and home equity loans.

Interest Only Loans:

• Definition: An interest only loan is a type of loan where the borrower only pays the interest on the loan for a certain period of time, typically a few years. After the interest-only period, the borrower must start making principal and interest payments.
• Important Points: This type of loan may have lower monthly payments during the interest-only period, but the total amount paid over the life of the loan may be higher due to the higher interest rates. These loans are commonly used for investment properties or short-term financing.

Home Equity Loans:

• Definition: A home equity loan allows the borrower to borrow against the equity they have built up in their home.
• Important Points: This type of loan is secured by the borrower's home, so failure to make payments can result in foreclosure. The interest rates for home equity loans are typically lower than other types of loans because they are secured by collateral. These loans can be used for various purposes, such as home improvements or debt consolidation.