How to Choose between Different Types of Mortgages

With so many different types of mortgage available, it’s difficult to determine the right one for you. Before you start looking at available mortgages, however, it’s important to first evaluate your finances, as your financial situation is an important factor that will dictate the type of loan you need, and how much you can afford to borrow.

Step One: Evaluating Your Finances

Before you even think about the type of mortgage you should obtain, it’s important to evaluate your financial situation. Check your credit rating and FICO score, evaluate your income and debt level, figure out the size of the down payment you can afford, and determine how much mortgage you can afford and what your credit rating will allow you access to.

When it comes to your credit rating, know that between 620 and 699, you’ll probably pay a higher interest rate than if your credit rating is over 700, due to a slightly higher perceived risk on the part of lenders. If your credit rating is below 620, you may find it’s better to wait and improve your credit rating rather than be forced into a sub-prime mortgage with a high interest rate.

Step Two: Choosing the Best Mortgage

Once you have completed an evaluation of your financial situation, you’re ready to start thinking about the kind of mortgage you want. The mortgage that best suits you will depend on a long list of factors, not all of which are related to the amount of money you have for a mortgage. Think not only about how much mortgage you can afford, but also your credit rating, how long you plan to stay in the home, and whether you think your plans or financial situation might change in the future.

So what are your main mortgage options?

Fixed rate mortgage

 

Normally a 10, 15, or 30-year mortgage, you pay the same interest rate over the life of the loan.

Good for: If you like the security of paying the same amount every month and you’re planning on owning the home long-term, this is definitely the best option. There are some variations on this theme, including jumbo mortgages, which are larger-than-standard loans with a slightly higher interest rate.

Adjustable rate mortgage

 

These are mortgages with adjustable interest rates, which come in several different varieties. When you first get an adjustable rate mortgage the interest rate is lower than that you’d get with a fixed rate mortgage. However, at intervals, the interest rate can increase or decrease according to current market rates. This means your monthly repayments aren’t fixed, so these types of mortgages are more risky in comparison to fixed rate mortgages.

Good for: If you want a mortgage with an initial low rate and you’re prepared to take a risk on later rates (or you only plan to own the home for a few years), this may be a good prospect.

Interest-only mortgage

 

The standard type of mortgage is amortized, meaning your monthly repayments include both principal and interest. An interest-only mortgage is just what its name suggests – your monthly repayments don’t have to include principal (but you can pay off principal amounts at any time). This means you are not building up equity in your home while you’re only paying interest, but there are no pre-payment penalties.

Good for: This type of loan can work well if your income is at a consistent level overall but is subject to highs and lows, since you can pay off extra principal when you can afford to do so, and pay interest only when your income is at a lower level.

Balloon mortgage

 

This type of mortgage has a fixed interest rate and stable repayments over the life of the loan, with lower repayments in comparison to a fixed rate mortgage. However, the terms of the loan are generally short, with three, five, and seven years being the most common options. At the end of this time period, the entire balance of the loan is due. The final payment is typically very large, so a balloon mortgage is one which shouldn’t be taken lightly.

Good for: This type of mortgage can be a good option if you plan to stay in the home long term, want to get your mortgage paid off quickly, or if know you can afford the balloon payment. Alternatively, a balloon mortgage can be useful if you know you’ll be moving or refinancing before the balloon payment is due.

30-due-in-7

 

For the first seven years of the mortgage you have a fixed interest rate which is generally lower than that of a standard fixed rate mortgage. In the eighth year of the mortgage, the interest rate changes to be in line with whatever the current rate is at that time. For the remaining 22 years of the mortgage, the interest rate stays fixed at that rate. Another option is a 30-due-in-5 mortgage, where the interest rate changes in the sixth year.

Good for: These mortgages can be a good option if you’re planning to stay in the house for more than five or ten years and you are willing to risk the possibility that your monthly payments may change substantially when the second interest rate is due.

About the Author

Rachel Jackson is a freelance writer who writes about topics and pertaining to the mortgage industry such as refinancing home mortgage.

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Learn Forex Trading & A Short Compilation of Answers to Emailed Questions on the Subject

I have been receiving quite a few emails recently asking questions regarding the best way to learn Forex trading and beginning to successfully invest in the markets.I have been answering them individually and this is a short compilation of the answers for all to read.

First, if you are going to buy a piece of Forex software and are under the impression it is a means to an end without a comprehensive understanding of the basic concepts to the advanced trading techniques then you are just fooling yourself.Why don't you just send me your investment capital to me, at least one of will be happy.Because you're not going to be.

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As for Forex software you are just going to lose your money using them until you know what you're doing.I know, because I lost $1,000's until I found Forex Made E-Z and started enrolling in every currency mentoring program I could find.If somebody is really serious about this and takes a mentoring class and gets the knowledge required to take advantage of the software I will tell what I use, which I think are the best products on the market.
Good luck, it is not that hard.And to all you non believers and skeptics I will give you something to think about.I will love to see you answers to this.

Guess what, a currency can only go in one of two directions.It can go up or down.That means if you throw darts at a board blind folded you would be correct 50% of the time.So, if you did not use margins, you would break even if you know NOTHING about the markets.So really, how hard can it be?All you really need to know is how to control your use of margins and make them work for you as opposed to against you.Then let's say you learn a little and are able to take your winning percentage from 50% to 60% or 65% you know what that buys you?Any thing you want is the answer!

Remember, you are guaranteed to be correct 50% of the time; you can NEVER do worse than this.NEVER, it is IMPOSSIBLE!

Therefore the two keys to making big money in the markets are only two small factors.The most important, understanding how to use of margins, leverage trading, forwards and options.The next is just improving you winning percentage a small fraction, which is where the software comes into play.

Now, let somebody dispute that!Impossible, you can't, the numbers don't lie.

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Improve Your Hiring Process with Pre-Employment Background Checks

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Concerning the Originator

Jim Sirbasku is co-founder and CEO of Profiles International, a leading provider of guy store administration rejoinder and trade assessments for businesses worldwide. For additional information near to via

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