Choosing The Right Home Mortgage Loan
Do the words fixed rate, balloon loan, and adjustable rate mortgages mean anything to you? If they don't and you are planning to buy a home, then you have to go through a quick terminology lesson. Those previously mentioned words happened to be the three most common types of home loans, so let's discuss each one of them so as to choose the best mortgage deal.
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.
This type of loan would be more preferred by those individuals who buy a house for investment purposes then plan to sell it fast as they can probably use the low interest rates, especially if they may get 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 third type is the Balloon Home Loan. With this type, you will make monthly payments for a fixed amount of time, with a fixed interest rate. The difference is that at the end of the payment schedule, you will likely owe the unpaid balance in one lump sum. So if you use a balloon mortgage, you will find that the interest rates are much lower than either a fixed rate mortgage or an ARM.
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.
This type of loan would be more preferred by those individuals who buy a house for investment purposes then plan to sell it fast as they can probably use the low interest rates, especially if they may get 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 third type is the Balloon Home Loan. With this type, you will make monthly payments for a fixed amount of time, with a fixed interest rate. The difference is that at the end of the payment schedule, you will likely owe the unpaid balance in one lump sum. So if you use a balloon mortgage, you will find that the interest rates are much lower than either a fixed rate mortgage or an ARM.
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
10:34 AM
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