Real Estate Mortgage - What is Ideal For You

Real Estate Mortgage - What is Ideal For You

If you are planning to buy your first home or invest in real estate, one of the first things you need to consider is the type of mortgage you are going to use. Let's face it, unless you are a millionaire and have plenty of cash lying around, you need to get a loan in order to pay for your new home or property investment. Since there are so many types of mortgages that are available in the market, you probably have no idea which one is right for you. Well, below are the most common types of home loans that you can apply for. A fixed-rate mortgage, which is one of the most popular types of home loans, provides interest rates that do not change. The interest rate of this type of mortgage is the same or fixed all throughout the payment period. In a time of financial uncertainty, a fixed-rate mortgage can be very advantageous. However, this type is ideal for people who have money earmarked for real estate purchases because a bigger deposit is needed before a fixed-rate loan can be approved by the bank. Of all the types of home loans, this is also the most stable, especially if you think that interest rates are going to increase in the future. The length of the payment period for this particular type of mortgage can be anywhere from 15 to 30 years. An adjustable-rate mortgage, also commonly known as ARM, is another popular type of mortgage for both first-time homebuyers and real estate investors. With this type, you will initially be given fixed monthly repayment amount. However, after a predetermined period, such as after three or five years, the interest rates that will be applicable to your loan will be subject to market fluctuations. This can save you a lot of money in the future if the interest rate goes down, but you will lose a lot of money if the rate increases. If you are planning to stay for a short while in the home you are planning to buy, this type of loan is ideal for you. Just make sure that you are able to sell your property before the initial fixed-rate period expires, so you do not have to worry even if the interest rate goes up. A balloon loan is an ideal mortgage type for people who do not have ample money at the moment but are expecting to receive a big sum later in the future. This is also good for those who are just buying real estate for investment purposes. In this kind of loan, you will just be required to make small payments within a particular period of time. After this fixed period, however, you are expected to pay the remaining balance in lump sum. If you do not have the money for the balloon payment, you have the option to refinance. The loan period usually lasts for 5 to 10 years. Since it is quite hard to refinance loans these days, this is really not ideal for homebuyers who are not absolutely sure that they will be receiving a big amount of money before the mortgage period expires or ends.