All you need to Know about Mortgages |
Posted: March 28, 2016 |
If you are part of the lucky few or you belong to the one percent of world millionaires, you can afford to pay cash upfront for the full price of a property or home. However, in order for most people to own a home or property nowadays, they will most likely need to take out a mortgage. Mortgages are a lifelong commitment, much like making a career choice or getting married. It is very important to get informed about what your options are. Below are the different types of mortgages available today. Information is power and getting informed is the first step in making the right decision. 1. Fixed-rate mortgages A fixed-rate mortgage is one whereby the interest rate remains constant throughout the entire period of the loan. This type of mortgage is the most popular, representing well over seventy five percent of all home loans in the United States. The repayment period for this is approximately twenty years, although you may find some ranging between ten, twenty and thirty years. Fixed-rate mortgages are usually very popular due to the fact that the homeowner knows exactly how much is required for him or her to pay. This allows one to budget ahead and plan easily. The downside to this type of mortgage, however, is that no matter how low the interest rates drop, you will still be required to pay the agreed rate. The rates for this are constant and unnegotiable. Fortunately, you are cushioned when the opposite happens and the rates go up. 2. Adjustable-Rate Mortgages As the name suggests, the adjustable rate mortgage is one whereby the interest rate changes based on a specific schedule after an agreed upon fixed period, done at the beginning of the loan signing. Most people do not find this loan preferable because of the risk it presents. The payments can go up significantly and cause a crisis if you are not able to meet the payments. It can however also go down significantly giving you an upper edge to the fixed rate mortgage. This is a complicated loan to understand and further explanation is necessary. You may visit a website such as http://managestgeorge.com/ in order to consult with the experts. 3. Step Mortgages A step mortgage is almost similar to an adjustable rate mortgage, the difference is that a step mortgage has the same interest rate for most part of the mortgage period, and a different rate for the rest of the mortgage period. This is commonly referred to as a two-step mortgage. The interest rate changes or is adjusted in accordance to the rates of the current market. On the bright side though, the borrower may be presented with the option of making the choice between a variable interest rate and a fixed interest rate at the date of adjustment. Many homeowners or prospective homeowners are stuck with a mortgage they would otherwise not have taken if they had all the facts beforehand. This article mentions the most popular or most common types of mortgages although there are other types to consider. Be well informed before you make your choice.
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