| There are three major types of home mortgages | | | | lenders offer a low, introductory interest |
| - fixed-rate mortgages, adjustable rate | | | | rate followed by an interest rate that's |
| mortgages and alternative or combination | | | | based on the market average, or slightly |
| mortgages. Each of these has its benefits and | | | | above the prime rate. In this scenario, as |
| disadvantages along with different types of | | | | interest rates rise and fall, so do your |
| lending and interest setups within each major | | | | mortgage payments. |
| type. To learn more about the pros and cons | | | | |
| of the different types of home mortgages, | | | | Bear in mind, though, that the key risk with |
| keep reading. | | | | an adjustable rate mortgage is if the general |
| | | | real estate market rate rises, one's monthly |
| Fixed Rate Mortgage | | | | mortgage payment (on the interest) will rise |
| | | | as well. |
| A fixed rate mortgage is your standard, | | | | |
| typical, mortgage. Its main advantage is that | | | | If you're part of a family that expects its |
| your housing costs are predictable - you know | | | | income to rise over the years, are only |
| how much you can expect to pay every month, | | | | planning to own your home for a short period |
| when your mortgage will be paid off and | | | | of time, anticipate stable mortgage interest |
| exactly how much it will cost you in interest | | | | rates in the foreseeable future, or simply |
| payments. | | | | want to get into the housing market but the |
| | | | interest rates are simply too high to lock in |
| Typically, a fixed rate mortgage comes in a | | | | with a fixed rate mortgage, than an |
| 30-year term. However, homeowners who are | | | | adjustable rate mortgage is for you. |
| refinancing their homes have increasingly | | | | |
| been tapping into shorter 15-year terms, | | | | Combination Mortgages |
| while first time home buyers sometimes | | | | |
| consider terms as long as 40 years in order | | | | It is possible to obtain mortgages that |
| to pay less on their monthly debt. | | | | change their type as they mature. For |
| | | | example, the Super Seven or Two-Step mortgage |
| Another popular type of fixed-rate mortgage | | | | gives homeowners a low, predictable interest |
| is the bi-weekly mortgage. Because making | | | | rate for the first seven or ten years of |
| your mortgage payments on a bi-weekly basis | | | | their mortgage. At that point, their interest |
| allows you to make two extra mortgage | | | | is reevaluated based on current market |
| payments every year (therefore the equivalent | | | | conditions. |
| of 13 monthly payments instead of the normal | | | | |
| 12) , you can pay down your mortgage faster | | | | The benefit? A lower interest rate to start, |
| and save tens of thousands of dollars on | | | | particularly if you plan to sell the home |
| interest alone. | | | | within 7 years. The drawback? Depending on |
| | | | rates, your interest rate could jump as high |
| The major disadvantage of a fixed rate | | | | as 6 or 7 percent by the end of your term. |
| mortgage is that if you get your loan when | | | | |
| interest rates are high, you're locked in at | | | | The type of mortgage you ultimately select |
| that rate. So, if interest rates fall, you | | | | for the purchase of a home is a weighty |
| lose out on that potential interest savings | | | | decision that must factor in a number of |
| and would then need to walk through the steps | | | | risks and personal circumstances. Before |
| of refinancing the loan to get a lower rate. | | | | jumping into the excitement of new home - |
| | | | especially for first time buyers - you should |
| Adjustable Rate Mortgage | | | | talk over options with your spouse, other |
| | | | family members, and those who have some |
| Adjustable rate mortgages become very popular | | | | expertise in matters of finance and real |
| when interest rates are high. Typically, | | | | estate. |