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If you are currently looking for a new home,
chances are that in all the excitement you won't
really give any thought to the type of home loan
mortgage you take out, instead going with the
first one offered to you. This could be a
serious mistake ñ costing you thousands,
if not tens of thousands. Make sure you know all
about the different types of home mortgage loans
before you starting looking for that new dream
home!
Here are some of the basic types of mortgage
loans:
Fixed-rate home loan mortgage -
As the name suggests, this is a plain-vanilla
home loan. Basically you borrow a certain amount
over a certain period at a fixed rate of
interest. You then pay the same monthly
installments for the life of the home loan. The
benefit of a fixed-rate home loan is that you
can easily budget for the repayments. The
downfall of a fixed-rate home loan is that you
could end up paying a higher rate of interest
than everyone else ñ no one knows what
interest rates will be in 15-20 years time!
Adjustable-rate home loan mortgage -
Mirroring the fixed-rate mortgage is the
adjustable-rate mortgage. Again, you borrow a
certain amount over a certain period, however in
this case the interest rate is not fixed, but is
adjustable (or ëfloating' as you may also
hear it called). The upside to adjustable-rate
home loans is that the interest rate at the
start of the loan period can be lower than the
fixed rate would be. The downside is that it is
difficult to budget for, as the amount can
change, and you are at the mercy of something
outside of your control ñ interest rate
fluctuations, which can change quickly.
Hybrid home loan mortgages -
Trying to fill the void left with the downside
of the fixed and adjustable/variable-rate home
loans, the hybrid home loan lets you fix the
interest rate over the first part of the home
loan, and then switch to an adjustable/variable
rate later. The upside of hybrid home loans is
that they allow you to budget for your
repayments during the expensive time when you
first buy the home. The downside is that if
floating rates are much higher than your fixed
rate when the switch happens, you could find you
are paying a much higher repayment each
month.
To see our list of recommended mortgage lenders
with competitive rates for refinance, purchase
loans, second mortgages, home equity loans and
all other mortgage loans, visit this page
Recommended
Mortgage
Lenders
About the Author
Carrie Reeder is the owner of ABC
Loan Guide, an informational website about
various types of loans. The site has informative
articles and the latest finance news.
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