Mortgage loans are a huge financial responsibility. For the majority of people their homes are the only largest acquisition made in a lifetime. You have to be very careful when deciding on your mortgage in order to avoid current mistakes that can force you to overpay for your mortgage loan. Here are the main things that you need to know.
Your grandparents didn’t have much of a choice as far as mortgages were concerned: they had to choose between a fixed rate loan of 15 or 30 years. Nowadays,there are plenty of choices; neverthless, deciding on bad loan could cost you thousands of dollars. Today, there are these main categories of mortgages: fixed interest rate, adjustable interest rate, balloon mortgages and jumbo mortgages.
Fixed Interest Mortgage Loans
A fixed interest rate mortgage loan is one of the safest typical mortgage offers. These mortgage have an interest that stays the same throughout the life of the mortgage and because of this fixed rate, the monthly payment doesn’t change for every month of the mortgage. Provided that you pay your property taxes and insurance together with your mortgage payment, you may notice that your monthly payment has raised because of the taxes and insurance, but not the interest rate. This is the right mortgage loan for you if you’re one of those people who hates taking chances when it comes to your financial situation.
Adjustable Rate Mortgage Loans
There are lots of adjustable rate mortgage loans with different degrees of risk, nevertheless, they have one thing in common. These mortgages have flexible interest rates that your lender will modify regularly over the course of the loan. The interest rate your mortgage will change to is a financial indicator plus your lender’s profit. When interest rates vary in the market, your interest rate will fluctuate. Because your monthly payment will vary when the lender modifies the interest rate you need to be prepared to pay according to the way interest rates are going.
A balloon mortgage offers small monthly payments for five to seven years. Afterwards, the entire balance loan will have to be paid in a single payment. Unless you are able to pay off the entire loan balance, you will have to refinance or sell your house. These mortgages are best suitable for homeowners with short-term financing needs. Unless you are able to refinance the loan or sell you might find yourself in the danger of losing your home when the balloon payment is due.
Classic mortgage lenders don’t usually loan more than $500,000 this year for one family mortgage loan. If you’ve got higher mortgage needs, you will have to find a jumbo mortgage lender. Provided that you can afford to pay a much higher mortgage payment and have good credit a jumbo loan could be the answer to your problems.