There are many types and lengths of mortgages available for your consideration.
Some of the more common types of mortages are:
- Fixed rate mortgages
- Adjustable rate mortgages (ARM)
- Balloon mortgages
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Fixed Rate Mortgages
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A fixed rate mortgage usually comes in a 15- or 30-year term.
However, 10- and 20-year terms are also available.
As the name implies, fixed rate mortgages lock you in the interest rate and
demand a consistent payment amount per pay period.
These mortgages aren't "called".
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Advantages of fixed rate mortgages
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Adjustable Rate Mortgages
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The duration of an adjustable rate mortgage is even more flexible than a fixed rate mortgage.
It comes in 10-, 7-, 5-, 3- and 1-year terms; 6-month terms; and even 1-month terms.
Payments for adjustable rate mortgages vary from period to period
depending on the interest rate at the time.
These are a good type of loan for first-time home buyers who need to keep initial mortgage payments as low as possible.
It is also an appropriate financing tool if you expect an increase in income and
are capable of handling larger payments due to increased interest rates.
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Advantages of adjustable rate mortgages
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Some useful hints
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Balloon Mortgages
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A balloon mortgage is similar to a fixed rate mortgage in that
you pay a fixed amount per pay period for a set number of years.
The difference is that balloon mortgages are usually short term mortgages,
thus you are required to pay one large final balloon payment for the remaining principal at the end of the term.
Typically, this balloon payment is due at the end of 5, 7, or 10 years,
depending on the duration of your loan.
Borrowers of balloon loans can also refinance the loan when the balloon payment is due,
but this right is not guaranteed.
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With all this information in mind, you are now ready to shop for a mortgage that fits your needs.
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Back to Shopping for a mortgage