Know Your Mortgage
We’ve discussed mortgage loans, how painful they are and whether repayment is a good option or not. All through this I probably overlooked the fact that we haven’t checked out the different types of mortgage loans on offer. Well, I didn’t totally ignore them; I mean how can anybody ignore Adjustable Rate Mortgages (ARMs)? However, there are other types as well and choosing the right type of mortgage will not only save you a lot of money, it will also help you avoid a lot of heartache. Let us begin with the most popular of the lot — ARMs.
Adjustable Rate Mortgage Loans: The reason these loans were so popular is their really low introductory interest rate. These rates were so ridiculously low, that just about anybody and everybody wanted a share of the ARM pie. What most people forget in the rush is that the low interest rate is only valid for a period of time specified in the loan contract. At the end of the introductory period the mortgage lender adjusts the interest rate and payment amount.
Fixed Interest Rate Mortgage Loans: While the popularity of this traditional form of loan did take a dipping in the recent past, it is still the safest and best mortgage option for most people. Your monthly payment does not change over the life of the mortgage.
Jumbo Mortgages: I’d written about this type of mortgage loans recently. In case you need to borrow more than $417,000 for your home, you may need a jumbo mortgage loan. There’s quite a bit of risk involved with this type of loan as the interest rates are quite high.
Balloon Mortgages: Do you need short-term financing with a low monthly payment? Go in for a balloon mortgage loan. At the end of your loan period, you will have to pay back the entire balance. However, if you cannot pay off the balance or refinance the loan you could lose your home.
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