The Best Mortgage Option for You
One of the largest financial commitments you will probably make in your lifetime is a mortgage. The consequences of failure in this regard is so life-changing, you need to think it over and over again before finally deciding. It is best to sit down and do a lot of thinking and research, because the decision is so crucial.
There are a number of mortgage options to choose from depending on your status. Mortgages are long term loans that can last at least 10 years up to 40 years. Therefore, understanding the implications of the mortgage on your finances is a primary concern prior to agreeing on the terms of the loan. If you learn the pros and cons of each type of mortgage, it will help you decide on what type is best for you.
The three types of mortgage agreements are listed below.
What do you need the money for, where are you going to use it? It is helpful to answer this first so you know what type of agreement is ideal for your situation.
1) Fixed rate or adjustable rate. If you are going to choose a fixed rate mortgage, then you will pay the same interest every month for the entire loan period. Would you rather have changing interest rates per month? The advantage in a fixed rate mortgage, the money you pay out is the same each month; while in the adjustable rate mortgage interest rates can go down, and you pay less for that period.
Majority of people settle for a fixed rate mortgage than for an adjustable rate. If you plan to stay forever in your property, a fixed rate mortgage is more suitable, otherwise, if you have plans on leaving the property, the adjustable rate mortgage is best.
2) Government insured or conventional. Next, you need to determine if you want a government insured loan or a conventional one. There is no government backing in conventional loans, but the advantage of government insured loans is that you get backed up by the government in case of mortgage failure.
3) Conforming or jumbo loan. Finally, you need to decide what type of loan will best answer your financial need – a conforming loan or a jumbo loan? This depends on the amount of money you need, if it is a small amount or a huge one. Conforming loans are ideal for loans of a smaller amount, while jumbo loans are more applicable to very large amounts.
Study your options and do your research in order for you to arrive at a safe and sound mortgage decision.