A mortgage is essentially a type of loan designed to help you get the financing you need to cover the
cost of a home. Often included in the monthly payments are additional expenses such
as property tax and insurance. All though there are a few general types of mortgages, you usually have a large
number of options to help make your mortgage suite you.
Some of the genearl types of mortgages include...
The most common type of mortgage is a fixed-rate mortgage. With this type of mortgage you will have a locked interest rate for its entire term. This insures that your monthly payment will stay the same no matter how the economy index fluctuates.
Commonly referred to as an ARM, an adjustable-rate mortgage has an interest rate that will periodically change with the economy index. A certain percentage, which is usually a fixed percent for the term of your mortgage, will be added to the current index rate to determine your interest rate per period. Generally an ARM’s initial interest rate will be lower then that of a fixed-rate mortgage. This type of mortgage is a great solution when you only plan to be in your home for several years.
An interest only mortgage gives you the flexibility to adjust the amount you pay per month with a minimum payment covering the interest. Depending upon your cash-flow you may then choose how much, if any, you wish to contribute to your principal. This type of loan can be either a fixed-rate or adjustable-rate mortgage and usually has an interest only option for the first X number of years. An interest only loan is a good solution if you do not plan to stay in your house for more then 5 to 10 years.
Economy Index
The measure of interest rate changes that lenders use to determine the interest rate of your loan.
Term
The number of years in which you have to pay off the loan.
Some of the genearl types of mortgages include...
The most common type of mortgage is a fixed-rate mortgage. With this type of mortgage you will have a locked interest rate for its entire term. This insures that your monthly payment will stay the same no matter how the economy index fluctuates.
Commonly referred to as an ARM, an adjustable-rate mortgage has an interest rate that will periodically change with the economy index. A certain percentage, which is usually a fixed percent for the term of your mortgage, will be added to the current index rate to determine your interest rate per period. Generally an ARM’s initial interest rate will be lower then that of a fixed-rate mortgage. This type of mortgage is a great solution when you only plan to be in your home for several years.
An interest only mortgage gives you the flexibility to adjust the amount you pay per month with a minimum payment covering the interest. Depending upon your cash-flow you may then choose how much, if any, you wish to contribute to your principal. This type of loan can be either a fixed-rate or adjustable-rate mortgage and usually has an interest only option for the first X number of years. An interest only loan is a good solution if you do not plan to stay in your house for more then 5 to 10 years.
Economy Index
The measure of interest rate changes that lenders use to determine the interest rate of your loan.
Term
The number of years in which you have to pay off the loan.
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