You are planning to buy a house. Financing will be an important issue. You will want to get a good interest rate for your mortgage. Where is a good place to check mortgage rates? How many types of loans are there available? Here is a good place to start.
Searching for information
Most lending websites have information on interest rates. Your bank probably does also. Try searching online at any good search engine. You may see so many types of loans that it confuses you. Trying to get through the maze of terms can be daunting. Here are some explanations.
30 year with a fixed rate
Fixed rate loans, mean that the interest never changes. A thirty year, fixed interest loan, will keep that interest rate for the entire thirty years. Typically, these loans are conventional loans. They are harder to qualify for, in most instances. However, that is not always the case.
Five year ARM
ARM stands for adjustable rate mortgage. A five-year adjustable rate mortgage will not change for five years. After that, it can go up considerably. In good economic times, they are a fine investment. In bad economic times, they can be disastrous. Your interest will reflect the nation-wide interest rate.
Are you considering an adjustable rate mortgage? You may want to look closer at it. Maybe you do not expect economic conditions to improve? Perhaps you do not plan to refinance after the fixed rate period. These would be good reasons to reconsider.
An ARM can have many options. The cap amount can be different from loan to loan. Some may allow fewer interest hikes. Some will change into a conventional loan. All of these options can be confusing. It is best to talk to a professional that can guide you through the process.
There was an abundance of low interest ARM loans in the United States, recently. Many people bought more house than they could afford. As long as interest charges stayed low, all was fine. When they went up, there were huge numbers of foreclosures.
15 year with a fixed interest rate
The interest rates stay constant on fifteen year fixed rate loans. However, the payment is higher. Even though interest rates are lower, it may be too much payment for some people.
There is another advantage to the fifteen year, fixed interest rate loan. Besides the quicker payout, you can save a lot of money. Here is a case in point.
You finance $100,000.00 for a house, with a thirty year, fixed rate loan. Your payment is $537.00 a month for thirty years. After that time you have paid over $93,000.00 interest. With the same situation on a fifteen year loan, your payment is $765.00 monthly. After fifteen years, you paid less than $38,000 interest.
Balloon payment loans
These types of loans are considered risky. One a five year balloon loan, you will have to pay the loan off after five years. The advantage is, you will low payments and low interest for five years.
Talk to your bank or someone in the loan industry to make sure that you receive all of your options. There is a lot of information to go through. Take the time to make the right decision.