Mortgages: Which Type Is Right For You?
Mortgages: Which Type Is Right For You?
Mortgages: Which Type Is Right For You?Mortgages are loans that have to do with real estate. Real estate is property and anything that may be on that property, such as a house. There are two main types of interest rates for mortgages, fixed and adjustable. A fixed rate on a mortgage is when the interest rate is locked in and therefore won't change during the course of the term unless you refinance. An adjustable rate (otherwise known as an ARM, standing for adjustable rate mortgage) is when the interest rate can fluctuate during the course of the term of the loan. You could also get a mortgage loan with both a fixed and an adjustable interest rate. Many times a mortgage starts out with a fixed rate for a few years, and then after that it changes to an adjustable rate.
You can decide whether you want a fixed interest rate or an adjustable interest rate, or a mortgage with both. An adjustable interest rate will lots of times give you a lower interest rate at first for a while, but the interest rate can fluctuate quite high during the course of the term. There are lots of mortgages, however, that have caps on adjustable interest rates, so they will not ever go higher than a certain amount. If you are able to get a very low interest rate however, you may want to choose a fixed one so that it will never change (unless you refinance).
The term of your mortgage loan can also be decided on. The shorter the term of your loan (the amount of time you have to pay off your loan), the higher your payments will be, but the money you pay will be more toward the principle of the property (the actual cost of the property), and less on interest. Therefore, the shorter the term, the more money you save. It is therefore wise to choose the shortest term you can afford.
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