What Are Different Loan Scenarios?

Your Loan Size

One of the most basic parts of your loan is the loan size.

The loan size is usually judged in relation to the value of a property.

If the property is worth $100,000 and the loan size is $90,000 the loan to value ratio is 90%.

This ratio is a critical factor lenders will look at to decide if a loan is approved, what type of loan is approved, and what total loan amount.

Loan Types

There are many different kinds of loan programs. You may choose between many different loan options, including interest only loans, 30 year fixed loans, 40 year loans, minimum payment option loans, and many others.

These different loans may need to be offered to you the customer in different ways.

For example, a 90% loan to value ratio may actually be broken up into different loans.

For one loan type you may be able to get one loan for the 90% value of the property.

For another loan type you may get an 80% loan for the first loan and a 10% second loan to get a total of 90%.

Another loan type may require that the loan be split up into 70% and 20% pieces.

Different Payments

You can end up with very different payments if your loan is structured differently.

Second loans are usually more expensive than first loans. They usually come with much higher interest rates.

A loan that is a 70/20 split may be more expensive than an 80/10 split. This is because the second loan is for 20% of the property’s value rather than just for 10%. The second loan, with its higher interest rate, is larger in one scenario than another.