Which Mortgage is Right for You?


There are basically six or seven types of mortgages. Which one is right for you depends on different factors that include your:

  • monthly income
  • future expected income
  • current assets
  • liabilities


Fixed-Rate Mortgages
Fixed-rate mortgages are the most popular and have the same rate over the life of the loan, which is usually 10, 15, 20, 30 and even 40 years.

Adjustable-Rate Mortgage (ARM)
ARMs have rates that fluctuate over the life of the loan. Typically, the initial rate is low but increases each year. There is a cap to how high it can go and rates can sometimes drop.

Two-Step Mortgages

Sometimes called 5/25s or 7/23s, these 30-year loans have a fixed rate for the first five or seven years and can be either convertible or nonconvertible.

A convertible loan converts to a fixed-rate after the first five or seven years.
A nonconvertible loan converts to an ARM after five or seven years.

FHA Mortgage
A Federal Housing Administration (FHA) loan has pre-set spending limits and only require 5% down instead of the usual 20%. One drawback is its high mortgage insurance premium.

VA Loans
A Veterans Administration (VA) loan allows military veterans to purchase homes with no down payment. It’s important to note that veterans are not allowed to pay points.

Balloon Mortgages
With a balloon mortgage you pay either the principal and interest or interest only but the loan must be paid in full when it’s due.

Bi-Weekly Mortgages
Bi-weekly mortgage holders save a considerable amount of interest by cutting the life of the loan down by years. The mortgagee makes two ½ payments a month which equals 13 payments a year instead of only 12.

Talk with your lender to determine which mortgage is right for you and your circumstances. They can give you all the details and factor in your needs to come up with the right mortgage option for you.

 

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Bill Zufelt  Realtor®  License #01491164