How to Choose between Different Types of Mortgages

With so many different types of mortgages available, it is difficult to determine the right for you. Before us of available mortgages, start, however, it is important to evaluate your finances first, as your financial situation is an important factor that the type of loan you need to dictate, and how much you can afford to borrow is . First step: Evaluate your finances Before you think about the type of mortgage you should get, it is important to assess your financial situation. Check your credit rating and FICO score, you evaluate your income and debt, figure out the size of the Down payment you can afford, and determine how much mortgage you can afford and what your credit rating allows you to access. When it comes to your credit rating, know that 620-699, you will probably pay a higher interest rate than if you used your credit rating over 700, due to a slightly higher perceived risk on the part of lenders. If your credit rating below 620, you’ll find it’s better to wait and improve your credit rating instead of a sub-prime mortgages forced with a high interest rate. Second step: choosing the best mortgage Once you finish an evaluation of your financial situation, you are ready to start thinking about the type of mortgage to you. The mortgage that suits you best depends on a long list of factors, not all of whom who have a lot of money you stand for a mortgage in context. Do not think only about how much you can afford mortgage, but your credit rating, how long you want to stay in the house and whether your plans or financial situation may change in future thinking. So what are your main options mortgage? Fixed Rate Mortgage Normally, a 10, 15, or 30-year mortgage, you pay the same rate over the term of the loan. Great for: If you pay the security of the same amount per month and you are the owner of the house a long-term planning, this is definitely the best option. There are several variations of this theme, including jumbo mortgages that are larger-than-standard loans at a slightly higher interest rate. Adjustable Rate Mortgage These are mortgages with variable interest rates, which in various versions. When you first get an adjustable-rate mortgages the interest rate is lower than you’d get with a fixed rate mortgage. However, at intervals, the interest rate can increase or decrease according to the current market interest rates. This means that your monthly repayments are not fixed, so that these types of mortgages are more risky compared to fixed-rate mortgage. Great for: If you want a mortgage with an initial low rate and you’re ready to take a risk on future prices (or plan only home for a few years even), this can be a good prospect. Interest-only mortgage The standard type of mortgage paid off, which means your monthly repayments are both principal and interest. An interest only mortgage is what his name – if your monthly repayments do not have to include the most important (but you can pay principal amounts at any time). This means you will not build equity in your home while you are paying only interest, but there are no prepayment penalties. Good for: this type of loan may work well if your income is at a uniform level of total, however, is subject to highs and lows, because you can pay extra important if you can afford to do so, and pay interest only if your income at a lower level. Balloon Mortgage This type of mortgage has a fixed interest rate and principal payments stable over the life of the loan with lower repayments, compared to a fixed rate mortgage. However, the terms of the loan is generally short, with three, five and seven years is the most common options. At the end of this period the entire balance of the loan is due. The last payment is usually very large, so a balloon is a mortgage that will not take lightly. Good for: This type of mortgage is a good option if you are planning long-term residence in the home, want to pay your mortgage quickly, or if you know can make the balloon payment. Alternatively, a balloon mortgage to be useful when you know you will move, or refinance before the balloon payment due. 30-due-in-7 For the first seven years of the mortgage you have a fixed interest rate is generally lower than that of a standard fixed rate mortgage. In his eighth year of the mortgage, the interest rate changes in line with what the current rate is at this time. For the remaining 22 years of the mortgage, remains the interest rate, fixed at that rate. Another option is a 30-due-in-five mortgages if the interest rate changes in the sixth year. Good for: These mortgages may be planning a good option if you are standing in the house for more than five or ten years remain, and you are willing to chance that your monthly payments may change significantly when the second interest rate payable is risk.

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