There are various distinct types of mortgages if you’re looking to buy your first or even subsequent home. These different financial tools are designed so that a wide variety of borrowers’ needs are taken care of. This is especially since getting a house is such an important aspect of the economy and people’s lives. Some types have advantages for certain types of debtors, depending on what the financial situation is.
Distinct Types of Mortgages
30-Year Fixed-Rate
This is one of the most common home loans for people looking to keep their property long-term, particularly if it’s where they will retire. It sounds exactly like it’s stated as a loan that lasts 30 years and doesn’t have a variable interest rate. This is useful if you’re looking to have lower monthly payments and are willing to pay the extra interest. For some, this is the only option to afford their own property.
15-Year Fixed-Rate
This is just like the previous mortgage, though it’s on a term of 15 years instead of 30. The interest rate is also fixed. However, since the loan term is much shorter, the interest rate is also lower. While monthly payments are much higher, the total amount you’re paying is significantly less. This is a great option if you can put up a large down payment.
Interest-Only Mortgage
As it sounds, this one only involves payments on the interest charge of the lender. During this time, the actual account balance doesn’t actually go down at all. This is a good option if you want to keep monthly payments as low as possible while still having the ability to pay down the principal. It allows people who work on commission or even freelancers to pay what they can due to variable income.
Adjustable-Rate Mortgage
When first getting this kind of loan, it’s the same as most with a fixed interest rate for a time. Once that time is up, the rate adjusts. The initial rate can actually be locked in for quite some time, usually up to 10 years. This is great if you’re not going to own the property for the long term or think that interest rates will eventually lower.
