Deciding on a type of mortgage is a difficult task. There are numerous options, but in most cases, there is one that’s best for you and your situation.
Obviously, it is always best to consult an expert before making any final decisions, but this article can help you narrow down your options.
1) Fixed-Rate Mortgage
Pro:
The good news is, there are no surprises in this type of mortgage. The interest rate always stays the same over the entire term, usually 15, 20, or 30 years.
Con:
If the interest rate falls, you would be stuck paying a higher rate.
2) Adjustable-Rate Mortgage
Pro:
One of the main advantages of an adjustable-rate mortgage is that you can take advantage of lower interest rates when the market rates fall. A lower rate means lower monthly payments, which may help you qualify for a larger loan.
Con:
After an initial period, rates go back and forth over the lifespan of a loan. When interest rates rise, generally so do your loan payments.
3) FHA (Federal Housing Administration)
Pro:
This one permits buyers who may not qualify for a conventional home loan to receive one with low down payment.
Con:
The size of your loan may be limited.
4) VA Loans
Pro:
These are the guaranteed loans for eligible veterans, active-duty personnel, and surviving spouses. Offers competitive rates and no down payments.
Con:
The size of your loan may be restricted.
5) Balloon Mortgage
Pro:
Generally a fixed-rate loan with comparatively low payments for a fixed period.
Con:
After the beginning period, the whole balance of the loan is due right away. This type of mortgage loan may be a little risky for some borrowers.
6) Interest-Only Mortgage
Pro:
Borrowers are only instructed to pay interest on the loan, in monthly payments, for a fixed term.
Con:
After the commencement period, the balance of the loan is due. This could mean much higher payments, paying a lump sum, or refinancing.
7) Reverse Mortgage
Pro:
This type of mortgage allows seniors to convert equity in their homes to cash; you don’t have to pay back the loan and interest as long as you are residing in the house.
Con:
It can be subjected to aggressive lending techniques and false advertising, specifically by lenders that prey on seniors. Always make sure that the loan is Federally insured.
Conclusion
We hope that we helped you in figuring out what type of mortgage loan is the most suitable for you. Make sure to read up more on your desired type before you take the next step.
Happy Mortgaging!
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