There are several types of mortgages available for home buyers today. The first thing many people think of when they hear the term mortgage is the traditional 30-year fixed rate mortgage. This mortgage provides for a set monthly payment every month for the entire 30-year life of the loan. The monthly payment is determined at the outset of the loan, and the homeowner continues to make payments until the loan is paid off and the lien is satisfied.
These fixed rate mortgages also come in 15-year terms. Even though the loan term is only half of the 30-year mortgage loan, the payments are not double as you might expect. This is due to the way interest is calculated. The monthly mortgage payments on a 15-year loan are higher than those on the same amount mortgaged over 30 years, but you may be surprised at how little that difference really is. If you are considering a 15-year mortgage, you may want to run the numbers on a mortgage payment calculator to determine if you can afford the payments on a 15-year mortgage.
In addition to the traditional fixed rate mortgage, there are variable rate mortgages on the market as well. As opposed to fixed rate mortgages, these adjustable rate mortgages will see their monthly payments fluctuate as interest rates rise and fall. There will be a cap above which the interest rate cannot rise, as well as a rate and a time at which the adjustable rate mortgage can be converted to a fixed rate mortgage.
As you can imagine, a variable rate mortgage is great when interest rates are steady or falling and not so great when interest rates are on their way up. A rise in interest rates means a rise in your monthly mortgage payment, so it is important to make sure that you can afford the monthly payments even if the interest rate rises to its highest possible level.
No matter what type of mortgage you decide on, the decision to purchase a home is a significant financial decision. It is important that the buyer understand all the costs associated with home ownership - things like insurance, taxes and utilities can really add up. Once the buyer is ready to make the plunge, however, they may find that a home is their best investment in addition to a great place to live.
These fixed rate mortgages also come in 15-year terms. Even though the loan term is only half of the 30-year mortgage loan, the payments are not double as you might expect. This is due to the way interest is calculated. The monthly mortgage payments on a 15-year loan are higher than those on the same amount mortgaged over 30 years, but you may be surprised at how little that difference really is. If you are considering a 15-year mortgage, you may want to run the numbers on a mortgage payment calculator to determine if you can afford the payments on a 15-year mortgage.
In addition to the traditional fixed rate mortgage, there are variable rate mortgages on the market as well. As opposed to fixed rate mortgages, these adjustable rate mortgages will see their monthly payments fluctuate as interest rates rise and fall. There will be a cap above which the interest rate cannot rise, as well as a rate and a time at which the adjustable rate mortgage can be converted to a fixed rate mortgage.
As you can imagine, a variable rate mortgage is great when interest rates are steady or falling and not so great when interest rates are on their way up. A rise in interest rates means a rise in your monthly mortgage payment, so it is important to make sure that you can afford the monthly payments even if the interest rate rises to its highest possible level.
No matter what type of mortgage you decide on, the decision to purchase a home is a significant financial decision. It is important that the buyer understand all the costs associated with home ownership - things like insurance, taxes and utilities can really add up. Once the buyer is ready to make the plunge, however, they may find that a home is their best investment in addition to a great place to live.
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