Mortgage Loan Information - Know The Basics When You Refinance
Or Purchase A Home
by Carrie Reeder
If you are currently looking for a new home, chances are that in all the excitement
you won't really give any thought to the type of home loan mortgage you take
out, instead going with the first one offered to you. This could be a serious
mistake costing you thousands, if not tens of thousands. Make sure you know
all about the different types of home mortgage loans before you starting looking
for that new dream home!
Here are some of the basic types of mortgage loans:
Fixed-rate home loan mortgage -
As the name suggests, this is a plain-vanilla home loan. Basically you borrow
a certain amount over a certain period at a fixed rate of interest. You then
pay the same monthly installments for the life of the home loan. The benefit
of a fixed-rate home loan is that you can easily budget for the repayments.
The downfall of a fixed-rate home loan is that you could end up paying a higher
rate of interest than everyone else - no one knows what interest rates will
be in 15-20 years time!
Adjustable-rate home loan mortgage -
Mirroring the fixed-rate mortgage is the adjustable-rate mortgage. Again, you
borrow a certain amount over a certain period, however in this case the interest
rate is not fixed, but is adjustable (or 'foating' as you may also hear it
called). The upside to adjustable-rate home loans is that the interest rate
at the start of the loan period can be lower than the fixed rate would be.
The downside is that it is difficult to budget for, as the amount can change,
and you are at the mercy of something outside of your control - interest rate
fluctuations, which can change quickly.
Hybrid home loan mortgages -
Trying to fill the void left with the downside of the fixed and adjustable/variable-rate home loans, the hybrid home loan lets you fix the interest rate over the first part of the home loan, and then switch to an adjustable/variable rate later. The upside of hybrid home loans is that they allow you to budget for your repayments during the expensive time when you first buy the home. The downside is that if floating rates are much higher than your fixed rate when the switch happens, you could find you are paying a much higher repayment each month.
About the Author
To see a list of recommended mortgage loan companies online, visit this page: http://www.abcloanguide.com/mortgageloans.shtml - Carrie Reeder is the owner of ABC Loan Guide, an informational website with articles and more about various types of loans.
