The Different Types Of Home Mortgage Loan
When you are about to purchase a home, it wouldn't be surprising to get a little puzzled at all kinds of words lenders just throw at us. Terms like balloon mortgages, adjustable rate mortgages and fixed rate have succeeded in making our lives more complicated. Actually, those are the common types of home loans so as to select the best one, we will have to define each one of them.
First is the fixed rate loan and with this, you will have a fixed interest rate and that will not change for the life of the loan. So if you plan to buy a home and stay in it until you pay it off, then this would be the loan for you. Just take note that if interest rates go higher, yours will just stay the same. But just hope that they will not go down as you will be paying a higher interest rate.
The second type of loan is the adjustable rate mortgage or ARM wherein its interest rate goes along with the market. So when the interest rate goes low, your home mortgage rate goes low as well and if high, then your rate goes high too. Since the rate on a home mortgage loan affects your payments, you will not have any idea how much you will be paying for your monthly mortgage.
For starters, if you are purchasing a house for investment purposes and you plan to sell it quickly, you might take advantage of low interest rates by getting this type of loan, particularly if it looks as if they may go lower.
Another smart move in using an ARM is to buy a home during the time when interest rates are on the decline. You can have the ARM changed to fixed rate home mortgage loan whenever the interest rates reach the bottom.
The balloon home loan is the third type of loan and with this type, for a fixed amount of time with a fixed interest rate, you will do monthly payments. But in this type, you are to owe an unpaid balance in one lump of sum at the end of the payment schedule. So interest rates in this type of loan are much lower than the other two previous types.
The only drawback of a balloon loan is at the end, you have to make a huge payment but if you plan to keep the house for only a short period, this can just be the right loan for you.
When you get to really understand the types of home loans then you will be more confident and prepared to make the right decision in getting the best home mortgage loan for you and your family.
First is the fixed rate loan and with this, you will have a fixed interest rate and that will not change for the life of the loan. So if you plan to buy a home and stay in it until you pay it off, then this would be the loan for you. Just take note that if interest rates go higher, yours will just stay the same. But just hope that they will not go down as you will be paying a higher interest rate.
The second type of loan is the adjustable rate mortgage or ARM wherein its interest rate goes along with the market. So when the interest rate goes low, your home mortgage rate goes low as well and if high, then your rate goes high too. Since the rate on a home mortgage loan affects your payments, you will not have any idea how much you will be paying for your monthly mortgage.
For starters, if you are purchasing a house for investment purposes and you plan to sell it quickly, you might take advantage of low interest rates by getting this type of loan, particularly if it looks as if they may go lower.
Another smart move in using an ARM is to buy a home during the time when interest rates are on the decline. You can have the ARM changed to fixed rate home mortgage loan whenever the interest rates reach the bottom.
The balloon home loan is the third type of loan and with this type, for a fixed amount of time with a fixed interest rate, you will do monthly payments. But in this type, you are to owe an unpaid balance in one lump of sum at the end of the payment schedule. So interest rates in this type of loan are much lower than the other two previous types.
The only drawback of a balloon loan is at the end, you have to make a huge payment but if you plan to keep the house for only a short period, this can just be the right loan for you.
When you get to really understand the types of home loans then you will be more confident and prepared to make the right decision in getting the best home mortgage loan for you and your family.
posted by Credit Counseling at
4:47 AM
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