Which Type Of Home Loan Should You Get?

When it comes to home loans, there are many to choose from. It can be confusing at best to decide if a 30 year fixed rate loan is better than a 15 year fixed rate loan or if you need an ARM loan or one with Interest Only. To further complicate matters, there are also those with Payment Options and of course, the ever famous Balloon payment loans. If you’re not confused by now, then you’re amongst the few who are seeking home loans that have this mastered. For the rest of you, read on.

man with calculator and home loan applicationOne of the easiest ways to determine which type of home loan will best suit you is to go online and read in more detail about the various options on loans. There are also websites that offer you mortgage calculators where you can compare what the mortgage payments would be with the various types of loans.

Before you ever decide on a loan, you’ll need to determine how much of a house you can afford. How large is your downpayment going to be?

Once you have these numbers in mind you can begin your search for a loan. Some loans will require a larger downpayment than others so you’ll want to take this into consideration when you’re seeking your loan details.

For some, a 30 year fixed rate loan is ideal. They’ll have reasonable payments and be able to afford the home of their dreams. Others, who may have more money available, may wish to double the size of the payments and pay this off in 15 years. By doing this, they’re paying down the interest rate much more quickly and will own the home outright in just 15 years.

Adjustable rate mortgages will adjust the interest rates accordingly with the market and the specific terms of the loan. This has both good and bad benefits. It’s good in that it can sometimes get the payee a better deal, however, it can also wind up costing you a lot more money if the rates go up.

Keep an eye on the market if you’re with an Adjustable rate mortgage and do what you can to secure a fixed rate lower interest mortgage. This will help to keep your payments low.

The best benefit of the fixed rate mortgage is that you’re going to have a set payment amount throughout the lifetime of the loan. It won’t vary and you’ll never have to be concerned about it going up.

This can have a great impact on the budget as there are never any surprises that will catch the payee off guard. You’ll likely pay a bit more for such stability, but for peace of mind, it may be well worth the increase in payment so you’ll be able to rest assured that you’ll stay within your budget.

Many shoppers who are trying to save as much as they can upfront will turn to an adjustable rate mortgage because the initial loan is much less costly than the other options. However, this won’t be locked in so they may actually wind up paying more in the long run. It’s a risk that many aren’t afraid to take.

Still, others will try to find an alternative route to go so that they won’t’ have to ever worry about their loan going up.

Now that you know more about loans, you can determine which route will work best for your specific needs. It can be a huge challenge to determine which loan you’re going to go out for but it’s a great peace of mind when you are able to choose the one that works the best for you.