Different Types of Home Mortgage Loans
It is important that you first know and understand the different types of mortgage loans along with its benefits before approaching a creditor. The terms and interest rates of mortgage loans are negotiable, especially if you have a pleasant credit record.
Most creditors or loan companies profit much from home mortgage loans through the interest rates that they impose. When choosing which type of loan you should avail, make sure that you weigh the pros and cons before reaching a final decision. Home mortgage loans are long-term and it usually has variable rates, which means that it can either go up or go down depending on the current economic situation.
Let me discuss to you the different types of mortgage loans:
1. Fixed Rate Mortgage Loan (FRM)
With this type of home mortgage loan, the interest rate remains the same throughout the entire repayment period. The advantage of a fixed rate is that the debtor will be paying the same amount every month, which allows him to have a precise budget monthly. This loan is perfect for people who are very particular on their finances and wouldn’t want to take the chance of getting lower interest rates.
The loans that basically have fixed rates are those that have 15 and 30 years repayment terms. Fixed rates are, likewise, used in short-term loans where debtors pay up their loans on a weekly or bi-weekly basis.
2. Adjustable Rate Mortgage Loan (ARM)
The interest rates of such loans are dependent on the market trend. This means that if the economy is doing well, the interest rates will be lowered, but when it’s experiencing a downturn, the rates will definitely soar high. This type of loan can be very risky since the economy is very unpredictable.
3. Veteran Affairs and Federal Housing Administration Loan
This type of loan can be availed by people who are and were in the military service. These people can derive many benefits from this loan. VA and FHA loans have low interest rates or no down payment options. And if one has a good credit record, he or she will have bigger chance to be granted a bigger loan having a very little interest.
Choosing the type of loan is a serious matter as you need to see closely the possible benefits that you can get from each one of them. You also need to be knowledgeable of the terms of the different mortgage loans so you’d know which one to pick.