Common Types of Mortgages
When you need a mortgage, you need to gather much information about it. There are many types of mortgage that should be known. You need to understand one by one if you want to take mortgage. Each type has certain benefits and detriments. If you want to get the best one, you need to learn the characteristic of each type.
At this time, I want to tell you the most common types of mortgages. But before we go into that top it’s also important you understand something. Having a debt case manager look at your finances is your first step. New Era Debt Solutions can help you get cash flow problems in order before considering Mortgages.
The first type is a fixed-rate mortgage. It is considered as the most common type. It is also the simplest type to understand. You will remain same payment each month though there is a change the course of the loan. You won’t be at risk of sudden increased interest rate since your interest rate is locked in.
Of course, you won’t get benefit when interest-rate increases. You can be harder to be eligible a fixed-rate mortgage if the stellar is more than your credit score. The down payments are usually high. Most lenders require 20% of the loan to stay away from costly mortgage insurance. Fixed-rate mortgages are most usually offered for 30, 15 and 10-year terms. Longer term commonly means lower payments, but it also means it will take long period to make equity in your home. You should pay more interest during the life of your loan.
The second type is adjustable rate mortgage (ARM). This type offers lower down payment than fixed rate mortgage. It also offer lower initial payment and initial interest rate that can make many people easily to qualify the better homes, The interest rate stays stable for certain period of time. Then, the interest rate could rise and fall periodically based on the financial index. The downside of this type is it can make yearly budgeting tricky. There are numerous kinds of ARM. 1-year ARM commonly offers the best mortgage rates. But, it is also the riskiest since your interest rate changes each year. At higher rates, the hybrid ARM will offer longer primary fixed-rate stage. Common hybrid loan offers a fixed rate for 5 years and a yearly changeable rate for the upcoming 25 years.
The third type is interest-only mortgage. It is technically a type of ARM. These mortgages allow the home buyers to pay the interest within a certain period and keep the payments as low as possible. But, when the the period of interest-only payment is up, the payment will increase significantly.
After understanding about the types of mortgage, you can start to search the best lender. Searching the best mortgage lenders can be a hard thing if you do not have any information. It can be an emotional and confusing process. You should gather much information before deciding to take the mortgage. The good lenders will give you competitive rate and make the process as flawless as possible. Internet will give you wider outlook than you get from your family and friends. With only a few clicks, you can easily find the reviews of the best loan lenders. But, you should be careful with the online information.
You will find very bad and very good reviews. If you couldn’t find the review of local lenders, asking around can be good idea to help you find the best lenders in your area. You can do a survey to your friend or family, especially if they have currently refinanced a home. You can ask about the lending process, the service of the agent, and the interest rates. If you meet the lenders for information and you don’t get it quickly, take the lender into your red list. Your mortgage is a big financial transaction, so you should feel comfortable with the lender. If the lender is not friendly, you need to search for another.
Remember to get your finances in order here: