Which Mortgage Loan Is Right For You?

When purchasing a home, you need to take a home mortgage loan. You can select from a wide variety of mortgage loans, study the types of mortgage loans available in the market and note the interest rates for each before you sign any documents.

Fixed rate mortgage loans charge you the same rate of interest each month over a period of 15 to 30 years. Over the tenure of the loan, you pay a high rate of interest because neither you nor the lender can take advantage of interest rate fluctuations. This is an excellent choice if you are on a fixed income or a salary.

Adjustable or variable rate mortgage loans (ARMs) are mortgage loans where the interest rate changes based on market trends either annually, or every three, five, seven, or ten years for the same period of time as fixed rate mortgages. Although they are considered risky due to the floating interest rate, the amount you pay as interest on the mortgage loan is lower as compared to that paid for a fixed rate mortgage loan.

Balloon mortgage loans have three to ten year tenures, during the entire tenure you pay the same amount each month. They are available at fixed or adjustable rates, but are considered highly risky because you end up paying off the interest on the mortgage loan and not the principal, and you stand to lose both the property and the money paid to date to the owner if you cannot pay off the loan balance at the end of the tenure or get refinance.

This information should help you choose the right mortgage loan. Check interest rates carefully before purchasing and you should be all right!