Mortgage lenders will provide you extra mortgage alternatives than you can shake a stick at. They’ll convince you to get the big house you fell in love with, and assure you that you will be able to make the monthly bills, and pay the mortgage over 30, 40, even 50 years!
Wait! Before you make a decision and lock yourself into any form of “creative financing” option, make yourself familiar with how a loan works, especially the loan term and interest rate.
What mortgage term must you pick?
In relation to mortgage phrases, preserve the difference between shorter and longer-time period mortgages in thoughts.
Short-term mortgages such as 15 yr-mortgage, have lower interest rates but higher monthly payments. Long-term mortgages such as 30 or 40 yr-term have lower monthly payments, but higher interest- you will pay more in the long run.
It is recommended to get a 15 yr-mortgage term, yes it will be a higher payment, but keep in mind that you will not only be paying off your mortgage faster but will be saving thousands of dollars in interest.
What’s a better option, variable or fixed interest rate?
Variable interest rates—like an Adjustable Rate Mortgage (ARM)—are a no no! Sure, mortgage lenders will probably sweeten the deal by giving you a low rate, but just wait till the fee starts to evolve and get modified. Guess which way is that rate going… up! Keep some money to yourself and get a fixed rate loan.
Which mortgage loan is the great deal?
The proper loan is not the one that will allow you to buy the house you want, but can’t afford. The proper loan will be the one that fits your needs and budget. You want to actually own your home and not have to be in debt for the rest of your life.
If you can afford a higher mortgage payment go for the 15 yr-term loan with a fixed rate, that’s the way to a debt-free homeownership. If you can’t afford a high mortgage payment, be sure to a least lock yourself up with a fixed rate mortgage.