Buying a home can prove to be one of the biggest financial investments you may make in your lifetime. Financing such an investment is a huge commitment, and shopping for the right mortgage can become a very difficult and strenuous task. There are always different loans for different needs, so join us this week as we delve into the nuts and bolts of different mortgages, and help you find the one that’s right for you.
One of the most common types of mortgages in the market is a fixed-rate mortgage. Just as the name implies, a fixed rate mortgage locks-in the interest rate on your loan for the duration of the loan. For those who are settling down, and plan to stay put for a while, a fixed-rate loan may be in your best interest, as you know exactly what you will be paying each month until the loan is up. However, if the rates decrease, you will still be locked into paying your initial rate, unless you refinance.
Another popular type of mortgages are adjustable-rate mortgages, or ARMs. ARMs fluctuates the interest rate to correlate with the current market conditions, potentially altering your payment from month to month. For those who don’t plan to stay in one spot for long, say a military family, or for those who live in a region where the market can appreciate quickly, an adjustable-rate mortgage may be right for you. Being an adjustable-rate, the only downside is that payments may alter from month to month, so planning for the interest rates to rise, and by extension your mortgage payments, is the best approach to this type of mortgage.
If both of the above mortgages appeal to you, there is a hybrid of the two known as an intermediate ARM. These types of mortgages have a fixed rate for a certain period of time, and then switch to an adjustable rate for the remainder of the loan, which will fluctuate on a predetermined schedule. For those who want to stay put for at least a few years, an intermediate ARM may be right for you, as you are only locked into a certain rate for a few years. Be sure to check the rate caps on this loan, though, to see how high of a payment you may be incurring, and be sure to plan for it.
Mortgages can seem like a daunting topic to those who are new to them, but with the right information and know-how, you can easily pick out the mortgage right for you. There is a different type of loan for every type personal situation, so talk to your American Dream Realty agent about your situation to help us find the right loan for you!