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| Mortgages articles and financial advice. |
Home Mortgage
Houses on sale today require down payments that are more than
a
renter can afford. So how do you own a home when you do not
have enough savings to cover down payment costs? The answer
is a home mortgage.
A home mortgage is actually different from a home loan. A home
mortgage is the contract that you sign in order to get a loan
from a banking institution or lending company. The loan is the
money that the lender provides for you.
There are many kinds of home mortgages available in the market.
These home mortgages differ in their loan terms or their rate
status. The advantage of each type of home mortgage depends
upon the financial situation
of the times. Some home mortgages fare better when interest
rates are low. Others rise up to the challenge of high home
mortgage rates.
Fixed Rate Home Mortgage
Fixed rate home mortgages are home mortgages whose interest
rates remain set for the duration of the loan term. The monthly
payments for a fixed rate home mortgage may either for a period
of 15 years or 30 years.
Fixed rate home mortgages are considered stable. With fixed
rate home mortgages, your interest rates are guaranteed and
your monthly payments are predetermined.
A 30-year fixed rate home mortgage has its own advantages and
disadvantages. Usually fixed rate home mortgages with 30-year
loan terms give the consumers the opportunity to borrow money
on a long-term basis. The amortization period for this type
of fixed rate home mortgage is longer and the monthly payments
are lower. One drawback, however of this home mortgage is its
high interest bill and slow equity build-up.
15-year fixed rate home mortgages attract borrowers because
of its relatively shorter amortization period. Equity in this
home mortgage is quickly built up and interest bills are significantly
lower. One disadvantage though is that 15-year fixed rate home
mortgages have higher monthly payments and higher interest rates.
Adjustable Rate Home Mortgage
Contrary to a fixed rate home mortgage, an adjustable rate home
mortgage is a home mortgage where the rates are adjusted regularly,
usually after the first year is over. Adjustable rate home mortgages
generally have lower interest rates compared to fixed rate home
mortgages. But this low interest rate in adjustable rate home
mortgages is only for a short period of time. After about a
year, the new interest rate of an adjustable rate home mortgage
will either rise or fall, depending on the movement of the lending
company's prime rate.
Knowing whether or not an adjustable rate home mortgage is right
for you depends on your income status and the type of adjustable
rate home mortgage payment you plan to make. In the long run,
adjustable rate home mortgages might prove risky for the home
buyer.
Since adjustable rate home mortgages rely on the interest rates
of the market to adjust their own interest rates, monthly home
mortgage payments for adjustables are uncertain. When interest
rates in the market are low, you are sure to gain savings with
an adjustable rate home mortgage. However, when rates are high,
your adjustable rate home mortgage might cost you more than
you're willing to give.
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