subject: Choosing the Best Mortgage For You [print this page] Choosing the Best Mortgage For You Choosing the Best Mortgage For You
Starting out with the fixed rate mortgage loan, this is the standard choice for most homeowners. The fixed is referring to the interest that you will pay over the terms of the loans, rather its 15 or 50 years. When you purchase and sign those mortgage papers you will presented with the interest of the loan. Your interest will neither increase nor decrease for the entire time of the loan. The standard term for a fixed rate mortgage loan is 30 years. However this does not mean that you can not adjust this time. Talk to your lenders representative to find out what terms are available. A fixed rate mortgage loan will generally apply the majority of your payment to interest in the early years of the loan. Towards the end of the loan more of your payment will be put to the principal. If you would like to reduce your terms you may want to make biweekly payments.
Adjustable Rate Mortgage loans are also available but less desirable. Adjustable means that the interest can increase or decrease. This change can take affect after the specified amount of years has passed. This may be 1, 2 or 5 years. If you find that interest is increasing you will next find that so is your payment. There may be a maximum cap that is applicable but it still may allow for a 5 percent or more increase. Having a higher payment may be difficult or impossible to handle. Before getting a ARM loan you can safe guard yourself by having a savings that can be used to pay towards increased payments. If you don't have that savings you may find some other options helpful. Refinancing at a lower rate (if available) can help keep your payments low and keep you in your home. If you cannot qualify for refinancing you may check into debt consolidations. This can be used to help reduce your unsecured debt and lower your over all monthly payments. You then will be able to apply this savings to your mortgage loan. Another option is to check with your lender and there options of deferring payments or deferring just the principal part of the payment to the end of the loan. If all else fells you may find that you need to sell your house.
Biweekly Mortgage loans have payment terms where you will be paying a payment every two weeks. This payment will be half of what your usual monthly payment would be. By paying every two weeks you ultimately pay an extra payment each year. This will reduce the terms of your loan. However many lenders charge fees when enrolled in a biweekly mortgage. The fees may be take all up front or there may be a charge per each payment. To avoid these fees you may find that taking out a standard mortgage and making the biweekly payment s the best option. First check with your lender and ask if you can make biweekly payments. If your lender doesn't accept these types of payments you can either add extra money to your monthly payments, specifying that the extra goes directly to the principal or you can simply make an extra payment each year, also making sure the funds goes to the principal. Another thing to check is that there is no penalty for paying your mortgage loan off early.
An alternative to the standard 30 year mortgage is the 15 year mortgage. This is a great choice for anyone that can pay higher payments. Even though you are paying your loan off in half the time your payments are not necessarily double. For example on a $100,000 loan at 6 percent interest, a 30 year mortgage payment would be $599.55. If you have a 15 year mortgage your payment would be $843.86. Even though your payment would be higher your savings on interest is significant. On our example loan the interest over the 30 years would be $115,838.00 where on a 15 year mortgage the interest is $51,894.00. This is a huge savings. However there are some risks to consider with the 15 year mortgage. If you were to have a loss or reduction of income would you be able to make the payments. Having a budget that is tight may not be the best choice. Be sure that there is some extra money left over each month to put in savings to prepare for any circumstances that may come up or better yet have a savings in place before you get the loan. If you are worried about these risks you may be better off with the standard mortgage. You still can make the higher payments that you would on the 15 year mortgage and still payoff your loan faster. Again check with your lender about any prepayment penalties.
