The Most Common Types Of Mortgages
The first thing that anyone searching for a mortgage loan will notice is that there is more than one type of mortgage available. If you have never had a mortgage before, it is easy to become confused when trying to determine which type is right for you. Your mortgage lender is the bet resource for this, but it is always helpful to research in advance before consulting with them. This article will provide you with some of the most common information about mortgage types.
Years ago, borrowers were presented with one mortgage loan option: the 30-year fixed rate mortgage, which is still the most popular mortgage option today. There are two basic mortgage types today, the fixed rate, and the adjustable rate mortgage, but within these two types, there are several different sub-types, each one with its own risks and benefits.
Another common type of fixed rate mortgage is the 15-year fixed-rate mortgage, which allows borrowers to pay less total interest and gives them the ability to own their homes in a shorter amount of time, but requires higher monthly payments. While fixed rate mortgages have higher monthly payments, they sometimes end up costing borrowers less money in the long run because of their stable payment structure and typically lower interest rates.
Adjustable rate mortgages have their own drawbacks and advantages as well. As their name implies, adjustable or variable rate mortgages have interest rates that fluctuate depending on increases and decreases in national interest rates. Most variable rate mortgages have the same amount of monthly payments but the amount of the final payment may be different due to the fluctuating interest accrued over the term of the loan term.
Determining which type of mortgage works best for you is directly correlated to your credit score, since this will be an important factor in the rate that you are able to qualify for. If your credit score is in need of repair, be sure to take the time to do so before you speak to your mortgage lender and begin the qualification process.