| Mortgage is a loan that is obtained to close the gap | | | | a certain number of years, usually seven to ten years |
| between the cash in hand for a down payment and | | | | which will be as low as adjustable market rates, after |
| the purchase price of the home. While opting for a | | | | which period the balance should be paid in full which is |
| home mortgage loan, choosing the type of loan can | | | | a large sum of money to be paid in one lump sum. |
| clear half of the hurdle. There are various types of | | | | Balloon mortgages have interest rates lower than a |
| loans like fixed rate mortgage loans and adjustable | | | | traditional home loan. |
| rate. | | | | Fixed rate mortgage can be for a term of 30 year |
| In a fixed rate mortgage loan, the interest rate remains | | | | fixed rate, which has the greatest interest reduction |
| the same irrespective of the economy. Therefore the | | | | and easiest type to qualify for. The 20 year fixed rate |
| monthly mortgage payment is the same throughout in | | | | offers a lower interest rate and 15 year fixed rate, |
| effect. The main advantage of this type of fixed rate | | | | which is the same as 20 years term but increases the |
| mortgage is the certainty but the negative aspect is | | | | monthly amount to be paid. |
| that the amount of the monthly installment for | | | | In addition there are other loans like FHA loans, VA |
| repayment of the loan will be a little higher in the form | | | | loans and RHS loans. FHA loan is offered by the |
| of a higher interest rate. When the period of fixed rate | | | | Federal Housing administration to qualified homebuyers |
| loan is longer there is a certain amount of risk for the | | | | for moderately priced homes with a low down |
| lender because the difference in the increase of | | | | payment, usually three to five percent VA loan is |
| interest rate is borne by the lender and hence the | | | | offered by the department of veteran affairs, which |
| higher interest rate. | | | | has the added benefit of zero down payments. This |
| On the contrary, adjustable rate mortgage rates of | | | | type of loan is available only to military veterans RHS |
| interest adjust periodically during the loan term. And for | | | | loans are available to households with low or |
| this type of loans the overall interest rate is low. The | | | | moderate income located in rural areas or small towns. |
| main disadvantage in this type is the uncertainty of the | | | | To get a fair deal in home mortgage, it is advisable to |
| adjustment phase. During this period the monthly | | | | set a budget, pick the right type of mortgage, choose |
| payments will go up and down with the changes in | | | | a suitable locale, compare the cost of loans with similar |
| interest rates and it is highly unpredictable. | | | | ones and most importantly inspect the home to be |
| The third type of loan is the balloon loans or a reset | | | | bought. If these things are taken care of, a home |
| mortgage which starts with the fixed interest rate for | | | | mortgage loan can be worth taking. |