Commonly Used Types of Mortgage Loans
If you plan to buy a home, you will have to make a choice on what type of mortgage loan is best for you. It might be overwhelming to decide when there seems to be so many different options. What is best for you financially might not be what was best for someone else. If you plan to take out a mortgage sometime soon, it would be beneficial to learn how some of the most common types of mortgage loans work so you can know which mortgage is best for you.
The fixed rate mortgage loan is perhaps the most well known mortgage option. When interest rates are low, it is a good idea to get a fixed rate mortgage and lock in the interest rate. Whatever interest rate you get with your mortgage will stay with you unless you refinance the house. The amortization schedule with a fixed rate mortgage will stay the same throughout the term of the loan.
Terms of loans for fixed rate mortgages can be ten years, fifteen years, twenty years, thirty years, forty years, and in some rare cases, fifty years. Lower interest rates are offered for loans that have shorter terms since they are lower risk loans for the lenders.
If you hope to pay off your home as soon as possible, then getting a loan with as short of a term as possible might be wise. The shorter the term, the less interest you will pay on the loan over time. You can get a fixed rate mortgage with a term as short as ten years. In some cases, you can get a term as long as fifty years. The most common length of term is a thirty year term.
An adjustable rate mortgage is another common mortgage. They have become more popular over the past several years. Some buyers grossly misunderstand the ARM (adjustable rate mortgage) loan. The main thing to be aware of with this type of loan is that you need to expect that your monthly mortgage will change over time.
People will use this type of mortgage if they are using the property as an investment that they plan to sell when it appreciates in value. Sometimes they'll rent out a place for five to ten years in the amount of the interest only mortgage and then sell the property for a profit when it appreciates.
The fixed rate mortgage, adjustable rate mortgage, and interest only mortgage are the most commonly used mortgage loans. Depending on your situation, one of them could be the best mortgage for you.
The fixed rate mortgage loan is perhaps the most well known mortgage option. When interest rates are low, it is a good idea to get a fixed rate mortgage and lock in the interest rate. Whatever interest rate you get with your mortgage will stay with you unless you refinance the house. The amortization schedule with a fixed rate mortgage will stay the same throughout the term of the loan.
Terms of loans for fixed rate mortgages can be ten years, fifteen years, twenty years, thirty years, forty years, and in some rare cases, fifty years. Lower interest rates are offered for loans that have shorter terms since they are lower risk loans for the lenders.
If you hope to pay off your home as soon as possible, then getting a loan with as short of a term as possible might be wise. The shorter the term, the less interest you will pay on the loan over time. You can get a fixed rate mortgage with a term as short as ten years. In some cases, you can get a term as long as fifty years. The most common length of term is a thirty year term.
An adjustable rate mortgage is another common mortgage. They have become more popular over the past several years. Some buyers grossly misunderstand the ARM (adjustable rate mortgage) loan. The main thing to be aware of with this type of loan is that you need to expect that your monthly mortgage will change over time.
People will use this type of mortgage if they are using the property as an investment that they plan to sell when it appreciates in value. Sometimes they'll rent out a place for five to ten years in the amount of the interest only mortgage and then sell the property for a profit when it appreciates.
The fixed rate mortgage, adjustable rate mortgage, and interest only mortgage are the most commonly used mortgage loans. Depending on your situation, one of them could be the best mortgage for you.
About the Author:
Trinity walks people through the process of getting mortgages with bad credit and home loans with bad credit.
posted by Debt Consolidation Loan at
12:13 AM
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