November 4, 2007
What Type of Mortgage Loan is Right For You?
By NMFS in Finance, Real Estate | 0 comments
Home loans are given to those either purchasing an existing home or as funds to construct a new house. Loans are usually extended to individuals for at least 5 years, but most are 10, 15, or 30-year loans. There are many types of home loans available to potential buyers. Here are a few:
A mortgage with a fixed rate is really self-explanatory. The loan rate will stay the same for the life of the loan. The advantage here is that your house payment will pretty much stay the same for the entire time you have your mortgage loan. No surprises.
Many will choose the fixed rate, 30-year loan as it will most likely have the lowest payments overall. A 15-year fixed loan will obviously have the home paid off faster, but the payments will be higher.
Adjustable Rate Mortgage:
An adjustable rate mortgage is where the interest rate varies, periodically changing your interest rate and payment amount. The rate is decided by whatever the current interest rates are at the time of adjustment. One adjustable rate mortgage is called a balloon mortgage. This mortgage lets you start your loan with a relatively low payment, and when the balloon payments are due – which can increase your payments substantially – you can consider refinancing or selling your home. Ultimately, you are banking that in a few years you’ll be in a better financial situation.
Convertible Mortgage:
Another type of loan is a convertible mortgage loan. This is simply an adjustable rate loan that can be converted to a fixed rate after a certain length of time.
Having these loan options when deciding on buying a home can be kind of confusing. It is best to do some research on the various loan packages and learn which option would be best for you. Buying a home is a huge commitment, and the life of the loan will most likely be quite long, you don’t want to tie yourself into a mortgage that isn’t right for you.
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