Every person would like to own a home of their own. Home ownership has a distinct financial advantage over renting an apartment from someone. But before that dream can be realized, you must choose what type of mortgage is best for you and your family.
At this page, you will get to know about different types of mortgages. It will allow you to select the right one as per the needs. It will suit the best with you and your family needs. The collection of the things that will allow you to choose the right one is essential to have the benefits.
Mortgages are a cause for concern for many people. Most people don’t know enough about them and that is scary. They rely on a banking institution or a mortgage lender to tell them what to do. If the lender is honest, it works to the advantage of the homeowner. If not, the homeowner could find themselves in a pickle. Here are a few facts about mortgages that could be of help.
One issue with mortgages is how long to finance the home. It used to be that you chose a 30-year mortgage. It was a fixed rate or an adjustable rate mortgage, but it was issued for thirty years. Today, homeowners have a choice. They can finance a home for fifteen, twenty, or thirty years. It is up to them to decide. There are advantages and disadvantages to both.
For 30-year fixed mortgages, the interest rates tend to be low. The rate that you lock into will not change for the life of the mortgage unless you decide to refinance the loan. When planning family finances, it is easier to budget when the mortgage amount stays the same each month.
For 15-year mortgages, the owner wants to pay off their loan faster than normal. One would think that by cutting the time in half, the payment would be doubled. This is not exactly right. The payment increases by about $300 or $400 a month. A homeowner who chooses this option is financially able to make payments without causing other bills to suffer. A 15-year fixed mortgage will tend to have an interest rate lower than that of a 30-year fixed rate mortgage.
Adjustable rate mortgages are more unpredictable. The interest rate stays the same for a set amount of time as governed by the type of adjustable mortgage you choose. When the rate begins to change, it is dependent on the market at that time. You could have a higher interest rate than either a 30 or a 15-year fixed mortgage.
Twenty year terms are not as common as fifteen and thirty. If a homeowner is not exactly financially able to handle the payments on a fifteen, but they want to pay off their home in less than thirty years, then a 20-year mortgage is a sort of middle ground to get the payments that they desire.
Shorter mortgages have a distinct advantage if the borrower can afford it. The amount of interest paid is less by more than half if you choose a 15-year mortgage. Also, the home builds equity faster. For 30-year mortgages, the first few years of payment go towards the interest more than the principal.
The decision is largely up to the homeowner when it comes to length of mortgage term. As long as you can afford it, the shorter loan period reaps benefits of equity. If this is not a concern, the longer period means steady payments that won’t change.