Without a mortgage, owning a home would not be a reality for a vast majority. There are many factors you will consider when evaluating the best home loan for you. One of the crucial ones is the interest rate.
A fixed rate home loan is the most popular choice for most homebuyers. This is because buyers already know their monthly payments. In an uncertain economy, this is the type of mortgage you may choose as it brings some measure of security. Its predictability allows you to plan your payments efficiently.
Here are the common types of fixed-rate mortgages you can select.
7-, 15-, 30-, and 40-Year Mortgages
The 40-year fixed-rate mortgage is the longest in the market though not very common. It has the lowest interest rates and monthly payments because of its extended payback time. The 15- and 30-year residential property mortgages, however, have lower costs in the long run compared to the 40-year one. Seven-year mortgages are generally for commercial properties.
This fixed-rate home loan allows you to convert your mortgage to one with a lower interest rate if the market rates decrease once your loan is in effect. Before converting, however, your lender has setup fees that you need to pay. If you are considering changing to a lower interest loan, therefore, you should be sure the rate you are going for warrants this extra upfront fee.
This loan allows you to make small repayments monthly for the first five to seven years of your loan. After this period, you are required to pay off your remaining balance in a lump sum. Balloon mortgages, however, have a contingency that if you are unable to pay the lump sum, your loan is converted into a fixed-rate loan.
The above mortgage options are the best for manageable homeownership. But your choice of lender is very crucial since you will be dealing with the professional for years. Ensure you choose one who will have your best interests at heart and one who is willing to guide you through the process.