Buying a House for the First Time? How to Know What Kind of Home Loan Will Work Best for You
Saturday, September 22, 2018, 6:00 AM | Leave Comment
There are many different types of home loans. Choosing the one meeting your needs the best may be harder than choosing your favorite type of ice cream in a store with many different choices.
Here are some key factors you may want to consider.
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30-year-fixed-rate Loan
This loan has the same payment every month for the next 30 years. Therefore, if you like certainty, it may be the best option for you.
These loans are generally best for those individuals who foresee very little possibility that they will move over the course of the next 10 years. These loans may be great for those who like to set their budget on an annual or quarterly basis.
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15-year-fixed-rate Loan
These loans offer the advantage of paying a set amount each month like their 30-year counterparts. Payments, however, will be higher because of the shorter term of the note.
They may make a good option for those who like stability but who would like to have their loan paid off sooner. Make sure, however, that you can handle the higher payment.
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Adjustable-rate Mortgages
The amount that you need to pay each month adjusts throughout the time that you have the loan. For example, one of the most common types of adjustable-rate mortgages is the 7/1 where you pay the same amount monthly for seven years and then your rate adjusts based on current market conditions once a year until the loan is paid off.
These loans may be good for those who only plan on owning the home for a short time because the initial interest rate is often lower than on a fixed-rate loan. They can also be good for people who see their income increasing substantially in the future.
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Flex Pay Loans
This is the most flexible type of loan because you have the option to choose how you pay the loan. Some months you may choose to pay only the interest, some months you may choose to pay just the principle and some months you can choose to pay both interest and principle.
Generally, over the course of three months, you must pay the interest and the principle. These mortgage loans can be great with people who have fluctuating incomes such as freelancers and salespeople. They may also be good for people who are earning money on their money in stock markets or other options.
Talking to a mortgage banker about the type of loan that is right for you can often be a great place to start. Learn all the details before choosing the option fitting your needs the best.
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