Picking The Type Of Loan Is As Important As Choosing The Right Home – Fixed Rate Adjustable And Interest Only Mortgages

Picking The Type Of Loan Is As Important As Choosing The Right Home – Fixed Rate Adjustable And Interest Only Mortgages

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(Best Syndication) Buying a home is the smartest investment you can make, but there are some choices that need to be made when considering a mortgage. You may want to go through a prequalification process before you start looking for a home. This will give you a ball park figure for a price range.

From the investment standpoint, it makes sense to buy a home. You won’t be throwing your money away on rent. But which loan is best for you? You may want to consider talking to a loan broker first. Let them do some shopping for you.

Interest Only loans can be a good option for someone that expects to move within a few years. The monthly payments will be the lowest and you can cash-out on any equity gained if the home appreciates in value. With this loan you pay the interest but not the principle. At the end of some term, usually ten years, the loan may be due in full or convert to a traditional interest plus principle mortgage.

Adjustable rate mortgages are a good option for someone planning on selling or refinancing within a few years as well. This type of loan will usually start with a low monthly payment helping buyers qualify for the home. But beware; the payments will likely go up.

These types of loans may have caps on how much the monthly payment can go up per month and possibly a cap on the maximum interest rate. Since they are tied to interest rates and their fluctuations, the monthly payments could rise. Consider the prepayment penalties as well. This means if you decide to pay off the loan early, there could be a penalty. These penalties could disappear over the term of the loan.

The fixed interest rate loan is probably the best bet if you plan on staying in your home. If interest rates are high, an adjustable rate may be better. But is rates are relatively low and you can afford the payments, this loan may be your best bet.

By John Waters
Best Syndication Business Writer

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