How To Choose The Right Kind Of Mortgage?
Homeowners often need to decide the type of mortgage that is appropriate for them. The obvious first step of getting a mortgage is to submit the application. Although the overall process could be quite easy and simple, it shouldn’t be considered as something insignificant. Conforming mortgage is usually considered as the most standard type of mortgage. Standard mortgage usually has fixed rate and this makes it easier for homeowners to determine how much they need to pay for the duration of the loan. Conventional mortgage loans can be customized depending on our requirements.
Many mortgage loans have 30-year duration and this is preferable, because homeowners only need to pay lower amount of monthly payment. In fact, it is possible for consumers to pay lower amount of monthly payment after a period of time. VA, FHA and Jumbo loans may also have 30-year duration. For homeowners who want to repay their mortgage faster, it is preferable for them to choose the 15-year duration, although the monthly payments can be somewhat higher. It should be noted that although our monthly payments can be lower, we would need t pay more interest, if we choose the 30-year loan.
With 15-year loan, we would pay less interest and more principal each month, so it is possible for us to repay the mortgage sooner. If preferable, homeowners could choose the 40-year duration, although the total amount of interest can be quite higher. This could unacceptable for some homeowners. Alternatively, we could choose mortgage loans with adjustable rate, which offers fluctuating interest rate. First time homeowners could find adjustable interest rate a little bit harder to understand. It would also be a bit difficult to determine how much we need to pay for the duration of the mortgage.
Balloon mortgage loan is another type of loan that we could consider. It is basically a short term loan and this is often considered an easier way to get ourselves into the mortgage loan. Balloon mortgage should make the whole process financially feasible, because it is considered a more stable and reliable payment. This is a more preferable method for consumers who want to pay off their home much more quickly, such as three or five years. Sub-prime mortgage loans are another type of loans and despite getting the bad rap in recent years, it is still a viable and active option.
The problem is that sub-prime isn’t government backed and it may not require stricter approval methods. This could cause issues in the future if homeowners are unable to repay their mortgage and repossession could become a reality. Refinance mortgage loan is important to allow us to get fresh cash for other necessities, such as financing our new small business. Despite the type of refinancing we choose, we should make sure that we are getting the best option available in the market. For example, we could determine whether we will benefit from fixed or adjustable interest rates for our mortgage.