There are four different types of mortgage loans which are listed as follows:

1. Fixed Rate Mortgages - have a set interest rate and fixed monthly payments, usually over a 30-year time period. This type of mortgage is often most appealing to buyers because it features a fixed, regular payment schedule.

Note:  If you qualify, you may also want to consider a 15 or 20-year loan which will increase your monthly payments by about 15%-25%. This option could save you upwards of 50% in total interest throughout the life of the mortgage.

2. Adjustable Rate Mortgages - are the opposite of fixed rate mortgages in that they change regularly. In many cases the amount increases over time which could be a problem for buyers with a limited income.

Note: If you opt for this type of loan, be sure to insist on an interest rate cap in order to limit your rate increase to two percentage points per year and five to six points over the course of the mortgage.

3. Balloon Mortgages - require that you pay large lump

sums along with regular monthly payments in order to shorten the length of the loan.

4. Graduated Payment Mortgages - start off with a low monthly payment that steadily increases. This enables buyers to purchase a more expensive home than they can initially afford, with the expectation of making more money in the future.

Note: if you are forced to sell after only a few years, you still owe interest and have not even made a dent in the principal.

Regardless of what type of Mortgage you opt for, you should put a maximum acceptable rate clause into the Sales Agreement in order to safeguard yourself and prevent your interest rates from increasing beyond what you can afford.

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