Because there are so many options for home mortgages, choosing the right one can be challenging. Below is helpful information regarding various mortgage options but most importantly, anyone thinking about buying a home should make sure they have all their financial business in order. Unfortunately, too many people have lost homes because the mortgage payment was more than they could afford.
The first mortgage option is known as a Fixed Rate Mortgage (FRM), which is one of the primary choices. With this, interest rates would never change throughout the life of the loan, which means every month, the payment remains the same. Knowing the amount of money to be paid each month makes budgeting a little easier.
Another type of mortgage is the Adjustable Rate Mortgage (ARM). In this case, interest rates would fluctuate depending on the current market although there would be some restrictions as to the degree of change. If the market warrants higher mortgage interest, then interest on the loan would go up but if mortgage interest goes down, interest on the loan would go down, meaning the monthly payment varies. Typically, lenders prefer the ARM since some risk is eliminated.
Another type of mortgage that involves changing interest rates is the Graduated Rate Mortgage. Rather than have sharp jumps, interest on this type of mortgage is gradual and planned. Therefore, homeowners know ahead of time how much the monthly payment would be. For anyone that has recently moved from one location to another or perhaps the individual beginning a new career, this mortgage option is a good consideration.
While the balloon mortgage is not for everyone, it does have some advantages. With this, the borrower could be offered a Fixed Rate or Adjustable Rate Mortgage, which would be a decision made by the lending institution. The way this type of mortgage works is that the loan would have a consistent interest rate until at the end at which time one large sum would be due. The benefit is that monthly payments are low. However, since this type of loan has risks for the lender, it is typically only for commercial loans
For anyone interested in buying a home but still unsure as to the best mortgage to go with, a qualified lender could answer questions and help the borrower choose the loan that would be fit the need. In addition, mortgage calculators can be found online, allowing the buyer to do the math to see the mortgage that would work best.
by: Oliver Darraugh
About the Author:
Oliver Wingrove is a real estate specialist with one of the many house buying companies online.