Choosing a Mortgage Loan

There are advantages and disadvantages to every type of mortgage depending on your goals as a homeowner. Below are a few major keys to consider when deciding what mortgage is best for you.

If you plan to remain in your home for ten years or more your best option may be the Fixed Rate Mortgage. Fixed rate mortgages are loans that are amortized into equal payments within the life of the loan. There are no rate fluctuations and therefore the monthly payments never change.

On the other hand if you plan to sell your home before ten years you may want to consider an Adjustable Rate Mortgage. The initial rate of an adjustable rate mortgage is usually lower than that of a fixed rate mortgage to make it attractive because of its risk of fluctuating rates. Buyers who only plan to owner their homes in the short run or less likely to be hindered by the risk associated with fluctuating rates and usually benefit from the initial discounts that ARM offer.

If you plan to move in less than five years and expect the value of your home to increase tremendously than you may want to consider an Interest-Only Mortgage. This type of mortgage is just that, you only pay the interest of the loan along with any taxes and insurance associated with the costs of owning the home. When the owner sells the home in a couple of years, the increased home value should pay off the home loan and then some.

Interest Only Mortgages are beneficial because of their low monthly payments but it can be risky because the borrower is strongly depending on the foresight that their home will significantly increase in value in a short period of time.

The most common form of home financing, especially for first time home buyers and individuals on fixed incomes, is the fixed rate mortgage because of its predictability. To determine which loan is best for you, you should contact a loan officer or discuss your goals with a credit counselor.