If you are considering buying a home, then you may be a little confused by all of the terms you hear about home loans. After all, lenders just throw around words like fixed rate, balloon mortgages and adjustable rate mortgages without a thought. What follows are the three most common types of home loans. Study it, and determine which one would be right for you.
The first type of loan is the Fixed Rate Loan. If you are planning to buy a home and stay in it until you pay it off, then you will probably want a fixed rate home loan. With this type of loan, you will be assigned a fixed interest rate, and that rate will not change for the life of the loan. If interest rates do skyrocket, yours will remain the same. On the other hand, if they plummet, you will be paying a higher rate.
The Adjustable Rate Mortgage or ARM is the second type of loan. The interest rate with this loan type goes up and down with the market. In other words, if the interest rate is low, the rate on your home mortgage will be low, but if it's high, your loan interest rate will then reflect it. And because the interest rate on a home mortgage loan affects the payments, you will have no idea from reporting period to reporting period what your monthly mortgage payments will be. This type of loan obviously isn't right for everyone.
For starters, if you are purchasing a house for investment purposes and you plan to sell it quickly, you might take advantage of low interest rates by getting this type of loan, particularly if it looks as if they may go 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 balloon home loan is the third type of loan and with this type, for a fixed amount of time with a fixed interest rate, you will do monthly payments. But in this type, you are to owe an unpaid balance in one lump of sum at the end of the payment schedule. So interest rates in this type of loan are much lower than the other two previous types.
Just one big problem for this type of loan is the large payment due at the end. On the other hand, if you plan to hold the house for just a short period of time, the balloon home loan might just suit you well.
By understanding the various types of home loans that are available to you, you will be better prepared to make a decision on choosing a home mortgage loan that is just perfect for you and your family. - 16459
The first type of loan is the Fixed Rate Loan. If you are planning to buy a home and stay in it until you pay it off, then you will probably want a fixed rate home loan. With this type of loan, you will be assigned a fixed interest rate, and that rate will not change for the life of the loan. If interest rates do skyrocket, yours will remain the same. On the other hand, if they plummet, you will be paying a higher rate.
The Adjustable Rate Mortgage or ARM is the second type of loan. The interest rate with this loan type goes up and down with the market. In other words, if the interest rate is low, the rate on your home mortgage will be low, but if it's high, your loan interest rate will then reflect it. And because the interest rate on a home mortgage loan affects the payments, you will have no idea from reporting period to reporting period what your monthly mortgage payments will be. This type of loan obviously isn't right for everyone.
For starters, if you are purchasing a house for investment purposes and you plan to sell it quickly, you might take advantage of low interest rates by getting this type of loan, particularly if it looks as if they may go 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 balloon home loan is the third type of loan and with this type, for a fixed amount of time with a fixed interest rate, you will do monthly payments. But in this type, you are to owe an unpaid balance in one lump of sum at the end of the payment schedule. So interest rates in this type of loan are much lower than the other two previous types.
Just one big problem for this type of loan is the large payment due at the end. On the other hand, if you plan to hold the house for just a short period of time, the balloon home loan might just suit you well.
By understanding the various types of home loans that are available to you, you will be better prepared to make a decision on choosing a home mortgage loan that is just perfect for you and your family. - 16459
