WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?

With a Fixed-rate Mortgage, your payments will stay at a fixed amount for the entire term of your loan. You will not have to worry about your interest rates or monthly payments changing, which will provide you with peace of mind.

Types

15-year
30-year

Advantages

These type of loans are extremely predictable because they do not change at all. For first payment will be the same as your last payment, giving you incredible stability. Things like inflation in the housing market will also not affect you, so your monthly payments will be comparably low by the end of the term, even if they seem high to begin with.

Housing cost remains unaffected by interest rate changes and inflation.

If you choose an Adjustable Rate Mortgage, you are taking a bit more of a risk because you never know what interest rates will do. If there is a significant jump in interest rates, it could impact you for a lengthy period of time because there is no guarantee that the rates will come back down again.

Types

A Balloon Mortgage will allow you to sign up for an initial period, which is usually between 5 and 10 years, for a low interest rate. The problems is that once this first period has passed, you are responsible for either paying off the rest of the house or renegotiating and this second mortgage will bring you much higher interest rates.

A Two-Step Mortgage will adjust your rates only once and it will remain the same for the entire term after that first adjustment. This is the perfect solution for getting a mortgage in times of high interest rates, because your rates can be adjusted when the interest rates come back down.

Advantages

The advantages of these types of mortgages are that they are known to offer lower interest rates to start because it will go with the actual interest rate, rather than an adjusted one. This means that your monthly payments will be lower to start with as well, which is important to younger buyers who are just getting their start. This type of loan may also qualify you to receive more money, so look into that before deciding.

WHEN DO ARMS MAKE SENSE?

These types of loans make a whole lot of sense for people who believe that they will be making much more money a few years down the road. This is an especially good option for people who believe that they will have enough of a savings to pay off the entire house within 10 years because they can do so without penalty. This is also a good option for those who are not concerned with the possibility of interest rates rising in the future.

WHAT ARE THE ADVANTAGES OF 15- AND 30-YEAR LOAN TERMS?

30-Year:

On a 30-year loan, the first 23 years go towards paying off a significant portion of your interest. This means that you can deduct more money from your taxes over these years because this interest is tax deductible. Your monthly mortgage payments will also seem much smaller by the end of this term because inflation will have driven other peoples' housing costs up, while yours has stayed the same. .

15-year:

When you get a 15-year mortgage, you build up equity at a very rapid rate because the early you get it paid off, the more money you are putting towards your principle. Your interest rates will also be lower, which lowers the total amount that you pay over the term.