What mortgage is best for you?

Real Estate Agent with Ramagli GMAC

The basic types are fixed and adjustable rate mortgages. Adjustables start out lower with a fixed rate and then after a set period of years readjusts, usually a lot higher. The following are a few of the more popular types.

  1. 30 year fixed-You will always know what your payment will be. It will never change. This is the preferred mortgage for most people.
  2. 15 year fixed- Offers a faster repayment though your mortgage payment will be higher than a 30 year. Interest expenses will be much lower. If you can afford it and plan in staying in your home a while this may be attractive especially if you have kids. By the time they're ready for college your home could be paid off and can help with their tuition. (Or you can let them pay their own tuition!)
  3. Adjustable rate- Allows you to start off with lower payments and afford a bigger house now.  This may be desirable for you if you plan on moving within 3-5 years before the rate jumps up. If you plan on your income rising in the near future than this may be an option for you too. If you're not comfortable with the thought of not knowing how much your payment will be, then this probably isn't the mortgage for you. Be careful as most people expect their income to increase, but it doesn't always happen.
  4. Interest only-Allows you to pay just the interest at first. Payments then shoot up. These loans are usually for those who expect the value of their house to rise. Wouldn't really advise it in this market.
  5. 40 year fixed- You can get a lower payment by stretching the payment another 10 years, but it does come expensively. You may only save $50-100 a month with this mortgage but could end up paying an extra $300,000 in interest over the 30 year fixed. It really isn't efficient to choose this over a 30 year.

Of course it's always best to talk to your lender as they always have different products to offer but these are the basic ones. For most people, a 30 year loan will work just fine.



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