When you begin thinking about purchasing a home or refinancing a home loan it is easy to get bogged down in all the information circulating around the internet. The information can be difficult to decipher if you don't have a clear understanding of mortgage types.
For starters, let's be clear that the best mortgage is no mortgage. Without a mortgage you'll enjoy no monthly payments and no interest charges. While this may not be realistic for many, it is a realistic goal you can strive for.
To begin with, let's examine two different types of mortgages: fixed rate and adjustable rate home loans. As we review these options we will also look at the pros and cons of each.
A fixed rate mortgages are the most popular option and is easy to understand. You have a fixed interest rate and fixed payments that do not change over time. A fixed rate mortgage is great for those who plan on being in their home for a long period of time.
An adjustable rate mortgage generally starts with a lower rate which rises after a designated period of time. The mortgage documents will outline interest rate adjustments, time periods between adjustments, and an interest rate cap.
A variation on the adjustable rate mortgage is the interest-only mortgage. This mortgage works on the same premise as the adjustable rate mortgage except for the payments are interest-only with no credits to the mortgage balance.
Adjustable rate and interest-only mortgages are not considered to be wise choices by many financial experts. Some experts do recognize that these mortgages serve a purpose, particularly if you only plan to live in the home 5 years or less. Online tools like mortgage comparison calculators help you in the planning process.
In Closing
Those who have an adjustable rate mortgage and need to refinance to a fixed rate mortgage can use a mortgage refinance calculator to illustrate what to expect when you refinance your current mortgage.
Finance News Today is a free resource website on personal finance. We offer a free arm calculator and a free home refinance calculator to aid in your financial planning.
Notice: In accordance with FTC guidelines, we state that RealEstateProArticles.com has financial relationships with some companies and may be compensated if consumers choose to buy, subscribe or take any action to a product or service via the links on our website. Occasionally, we receive free access to review a product or service. We do not accept compensation in exchange for a positive review. These reviews are strictly the opinions of the author.
![[Valid RSS feed]](http://www.realestateproarticles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites