There are many different types of mortgage loans. It’s important that you understand your options and the different factors you’ll want to consider before deciding which mortgage is right for you.
Fixed-Rate and Adjustable-Rate Mortgages
There are two main types of mortgages: fixed-rate and adjustable-rate mortgages. Each mortgage comes with its own set of features and benefits for you to consider.
Fixed-Rate Mortgage: This mortgage type has an interest rate that stays the same for the life of the loan. If you select a fixed-rate mortgage, you’ll pay the same monthly principal and interest payments for the term of your loan. However, your monthly mortgage payment could increase if taxes and homeowners' insurance costs go up throughout the term of the loan.
Unlike renting, this type of payment will remain the same month after month, even when inflation leads to higher prices. These loans are best for those who plan to stay in their home for the long term, often 10 years or more.
Adjustable-Rate Mortgage (ARM): With this mortgage type, the interest rate is only fixed for a set period and fluctuates up or down for the life of the loan. These loans usually start with a lower interest rate, so your monthly payments start lower. Many ARMs start with an initial fixed period of a few years before they start to adjust each year. Some adjust only once every few years.
For more information about the common types of mortgage loans visit the Scoop Blog
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