Some More Information on Mortgage Types

Some More Information on Mortgage Types

Understanding Fixed Rate Mortgagess

The mortgage that has interest rate set for the whole life of the loan is called fixed-rate mortgage. The interest rate can either stay the same during the whole term or only during a certain period. Most home mortgages (about 75%) have fixed interest rates. The main advantage of this type of mortgage is that you always know what your payment is going to be so you can manage your funds beforehand.

The most noticeable thing about fixed rate mortgage is that you are sure that your interest rate will not change during a certain period and you always know exactly what your monthly payments are. This also means that your interest rate will remain the same despite current rates on the market, doesn’t matter weather they’re going down or up.

On one hand fixed-rate mortgages are easier to understand and very good for people who like to plan their monthly budgets; on the other hand they have slightly higher interest rates, and as a result – higher monthly payments, than adjustable rate mortgages and offer less flexibility to a borrower.

With adjustable rate mortgages the interest rate changes during the life of the loan. Its advantage is that you can buy more expensive home because your initial interest rate will be lower.

Is Interest Only Home Mortgage Right For You?

There are numerous advantages that you can get from an interest only mortgage loan if it is right for your situation. Some suitable cases to apply for an interest-only mortgage loan are listed below:

  1. The first situation is if you would rather pay large amounts from time to time, when you have more income; other times you pay as little as possible. This may be convenient for loan officers or real estate agents for example.
  2. If you are investing your mortgage payment savings in something else that is low risk, and has a much higher return on your money than your house payment.
  3. If your income is temporarily low but will increase in near future.
  4. If your mortgage is only temporary, for example, an investor looking to flip a property or someone who is working on a fixer upper. It is good when building your home equity is not a priority for you and you would rather make as low payments as possible.

With an interest only mortgage you can usually save around to 10% on your monthly payment. However, this number can vary depending on your situation.

So the interest only mortgage loan can save you money and give you some flexibility on your payments, this can help you to make your monthly payments on time.

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