Buying a home involves many decisions - and choosing the right mortgage is a big one.
While we’re here to discuss your options in greater detail whenever you’re ready, here’s a quick look at the most common loan types, which primarily involve a fixed interest rate over a long period of time, or a rate that can change over time.
Fixed-rate loans are the most popular home loans, and are good if you plan on staying in your home for a longer period of time or if you are concerned about fluctuating interest rates.
Fixed-rate loans come with an interest rate that is locked in and won’t change over time, meaning your monthly mortgage payment is something that’s predictable throughout the term of the loan. If rates were to drop significantly, you could consider the option to refinance your loan to reduce your payment.
The fixed-rate loans you hear mentioned most often are 30- and 15-year mortgages.
With a 30-year loan, your monthly payment will be lower than a shorter-term loan, but the amount of money you pay in interest over that time will be more.
A 15-year loan means you will pay less in interest, but your monthly payment will be higher because you’ll be paying off the loan amount faster.
Adjustable-rate mortgages – known as ARMs – are another loan option.
These loans can start with a lower initial interest rate than a fixed-rate loan, but the interest rate is variable and can possibly rise after a set period of time, leading to higher monthly payments.
An ARM can be a good choice for people who know they won’t be in a home for a long period of time.
For more details on home loans, talk to one of our trained mortgage professionals about your various options and what type of loan could be best for you. Click here to get started.