What are the Different Types of Mortgages?
There are all kinds of mortgages. Since the mortgage crisis – the lenders have stopped with some of the crazy mortgage options. Now, I think a fixed rate mortgage is the way to go. You can get a mortgage for a fixed term – and you lock in your interest rate. Now, rates are really low but may go up. So, I advise locking in with a fixed rate. An ARM – is an adjustable rate mortgage. Most of these have a very low teaser rate they offer for 5 years. Then the rate readjusts each year. Your rate can really jump. Part of the mortgage crisis now – is that the teaser rates are over and rates have reset and now folks can’t afford their payments so they are going into for closure. Interest Only – this is a hybrid mortgage. You can pay the interest only each month and no principal. This will allow you to buy much more home than you can afford. The problem is – your mortgage note never goes down and can actually go up. When you go to sell – you may owe more than the home is worth (be upside down).
The choices for a prospective home buyer may seem overwhelming at first, with everyone offering different advice and telling the potential buyer what to consider. Before long, he or she may be confronted with dozens of different choices from different providers, and this is just concerning the types of mortgages. Fortunately, while the wording and packaging may be different, types of mortgages basically fall into two major categories as far as the consumer is concerned: length and rate structure. The types of mortgages, that fall into the length category are usually either offered as 15-year or 30-year options. While the payment is substantially higher for the 15-year types of mortgages, they are not double the amount of the 30-year mortgage, as some may suspect. These 15-year types of mortgages do not pay nearly as much interest as a longer loan, and therefore the monthly payment does not need to be as much. Some say that choosing a 15-year loan is somewhat risky, just in case payment
Choosing the right mortgage is important to ensure your financial stability in the future. Here are the main types of mortgages: Fixed rate mortgages : Under a fixed rate mortgage, when you take out a loan from a financial institution to pay for your house, the interest rate that you pay on the loan and the monthly payment will be determined before you accept the loan. These values will remain the same for as long as you agreed to pay off the loan. Adjustable rate mortgages : With an adjustable rate mortgage, the interest rate and monthly payment of your home loan will remain the same only for an initial period of time, ranging from six months to five years. After that time the interest rate and payments can be periodically adjusted, based on current market interest rates. Balloon mortgages : A balloon mortgage starts off with an interest rate and monthly payment that is fixed for the duration of the loan, but after a short amount of time set by the lender, the entire loan must be paid
