Three Types of Mortgages
One of the largest financial commitments you will probably make in your lifetime is a mortgage. The consequences of failure in this regard is so life-changing, you need to think it over and over again before finally deciding. Clue up and do research before entering into an agreement.
There are a number of mortgage options to choose from depending on your status. It will take from 20 – 40 years before a mortgage matures. Being aware of what your mortgage entails for your finances in the coming years is therefore very important, before binding yourself to it. You can get a good idea of what type is best for you if you look into some of the advantages and disadvantages of each type of mortgage agreement.
Here are some helpful information to guide you in your choice.
First and foremost, you need to determine what your financial needs are, why you are applying for a mortgage. It is helpful to answer this first so you know what type of agreement is ideal for your situation.
1) Will a fixed rate or adjustable rate mortgage be best for you? If you are going to choose a fixed rate mortgage, then you will pay the same interest every month for the entire loan period. In an adjustable rate mortgage, on the other hand, the interest rates change. What suits you best, paying the same amount of money each month; or venturing on the possibility of lower interest rates because of adjustments?
Majority of people settle for a fixed rate mortgage than for an adjustable rate. For people who have no plans on staying long on the property, the adjustable rate mortgage is better; but for those who live permanently on them, fixed rate suits them best.
2) The two types according to the presence of government backing are: government insured or conventional. After deciding on what interest rate is ideal for your situation, you need to determine whether a government insured loan or a conventional one will suit you. If you are looking for a guaranteed backing from the government in case you fail in your financial commitments, then a government insured loan is ideal for you, because in conventional loans there are is government backing.
3) The two types according to size are: Conforming or jumbo loan. The next step is to determine whether a conforming loan or a jumbo loan is ideal for your situation. It all depends if you need only a small amount or a very big amount – how much money do you need? Conforming loans are ideal for loans of a smaller amount, while jumbo loans are more applicable to very large amounts.
Study your options and do your research in order for you to arrive at a safe and sound mortgage decision.