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What are the types of mortgages ?

Choosing the right mortgage can save you money in the long run because if you total up all the interest you pay in 20 or 30 years, the money you have paid for interest would almost be the total of your loan. Because of this, it is important to shop for mortgage loans before sealing the deal. There are four types of mortgage loans, each having its pros and cons.

The first and most common type is a fixed rate mortgage. As its name suggest, this loan has a fixed interest rate over the duration of your loan. If this is the case, you would pay the same principal and interest amount until the end of the loan, but the taxes or insurances could change. Loans with a fixed interest rate can offer down payments of as low as 5%, so if you need predictable payment schemes on mortgages, this type of loan may be the right choice for you.

An adjustable rate mortgage often starts at a low interest rate, but the payments and interests would fluctuate depending on the market’s interest rates. This type of loan is best for people who are expecting a raise over the next years, so they could make higher payments when increases occur.

Balloon mortgages are ideal for people planning to stay in the home for up to 7 years because these loans offer a lower interest rate compared to the traditional 30-year mortgages. However, the loan is usually due in 5 to 7 years.

A jumbo loan, as its name suggest, is a loan that offers over $250,000. If you need a large amount of money, this is the loan for you.

In choosing the right mortgage loan, make sure to use online calculators that could assist you in reviewing your options. These tools often include an online payment calculator, amortization schedules and interest calculators. Once you have decided on a loan, get a second opinion from a loan adviser to help you determine if your budget can accommodate the type of loan you desire to obtain.

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