Understanding Different Mortgage Types
TopRankinMortgages Inc. a home is one of the most significant purchases you’ll ever make. It’s not something to jump into without careful thought and planning, and that includes financing your new home. Understanding different mortgage types can help you choose the loan that best fits your financial goals and budget, as well as your long-term housing plan.
Fixed-Rate Mortgages
With a fixed-rate mortgage, your interest rate and monthly principal and interest payments will stay the same for the life of your loan. This provides consistency, which can make it easier to set a budget and stick with it. Keep in mind, though, that your monthly mortgage payment may still change if property taxes or homeowners insurance rates increase over time.
Understanding Different Mortgage Types: Finding the Right Fit for You
Adjustable-Rate Mortgages
The interest rate on an adjustable-rate mortgage (ARM) changes based on the performance of a corresponding financial index that’s tied to your loan. These loans typically include an initial period of fixed interest, followed by periods where the monthly payment includes both principal and interest. ARMs are most appropriate for those who plan to sell or refinance before the initial interest-only period ends, or who can reasonably expect to afford a higher monthly payment when that time comes.
A second mortgage is a way to use the equity you’ve built in your home over time to finance other expenses or achieve other financial goals. This type of mortgage is secured by your home, but it takes a subordinate position to your first mortgage in the event of a foreclosure sale. This type of mortgage is available as either a lump-sum home equity loan or a revolving line of credit called a HELOC.
