Types of Mortgages
Many people who are planning to buy their own homes come a bit confused and a bit overwhelmed with all the available mortgage options in the market. However, although the process of lending may have has some dramatic changes, the basics have pretty much stayed the same. Here are some of the types of mortgages to help you out in assessing which one would best fit your needs.
Fixed Rate Mortgage
This mortgage is considered to be the most common and most desirable among the other types. This is also one of the older types of home loan. Fixed rate mortgages are typically amortized over a specified period of time, such as 30 years, for instance. With this kind of mortgage, you would always be sure of how much your loan payments would be for years. This would be useful so that you would be able to create a realistic budget, which you could stick to through the years to come.
Adjustable Rate Mortgage
This mortgage is usually chosen by a borrower who wants to take a chance that the interest rates would be decreasing. An adjustable rate mortgage is not really very advisable as a lot of people who have gone this route just ended up dealing with skyrocket interest rates, as this kind of mortgage is very unpredictable.
Balloon Mortgages
This is yet another tricky type of mortgage. This enables the borrower to only pay the interest during the loan’s first term, which would usually be 5 to 10 years. After the first term, the borrower has to pay either the entire loan amount or refinance
the remaining amount. This loan may work if you would only have the house for a short period of time. And so, they might not be very advisable for long-term loans.
FHA and VA Loans
These would be government-insured loans. For FHA or Federal Housing Administration loans and VA or Veterans Affairs, the borrower has to be qualified first.
Filed under Mortgages : Comments (0) : Mar 22nd, 2008