Thursday, August 12th, 2010
There are three main types of mortgages – fixed rate mortgages, mortgages and variable rate mortgages balloon. Each of these types have their own sub-types, depending on the duration of their terms and overall flexibility. For more information on the three main types of residential mortgages and their advantages and disadvantages, see below.
Fixed Rate Mortgage
The fixed rate mortgage is the standard mortgage, traditional. This is a mortgage on his parents probably. It is easy to understand, easy to budget and very stable, predictable and stable.
A fixed rate mortgage has the same interest rate over the entire period of your mortgage. This way, you can expect the same monthly payment for the loan period and watch a box full repayment of your mortgage to see exactly where each payment will go to 15 or 30 years.
That is, although the principle of monthly interest and add the same amount each month, part of the payment of interest on the loan exceed the amount of start in the early years of the loan, then gradually change to the principle is much higher than the interest in recent years.
The advantages of a fixed rate mortgage goes beyond stability and may also result in significant savings. If interest rates are low, locking in the price of a fixed rate mortgage before rates go up, could translate into significant savings – perhaps tens of thousands of dollars – in the long term.
Adjustable Rate Mortgage
The variable rate mortgage tends to be for those who prefer a little more risk, but lower monthly payments in the first two years, while O. Although homeowners have adjustable rate mortgages tend to pay less interest owners with a fixed rate mortgage, there is always an element of risk to be weighed carefully.
With a variable rate mortgage, your interest will change depending on current interest rate standard. If interest rates decline, so does your rate and monthly payment. If rates rise, the reverse is true. Essentially, the risk of fluctuating interest rates rose to the borrower and the lender.
Because a higher risk you assume, lenders offer very low initial rate and a slightly lower current.
MORTGAGE
The balloon mortgage is designed for owners who expect to live at home for a short period of time or to anticipate the arrival of cash or equity in recent years.
The balloon mortgage works by creating a loan that is shorter than the amortization period, then collect the balance at the end of the period.
For example, you have a mortgage of $ 200,000 and the loan is 10 years, but has depreciated over 20 years. That is, you make monthly payments based on the face that is to take 20 years to repay. But then, after 10 years you will pay for the remaining capital still owed. Therefore, the analogy of a balloon. “
Tags: Home Mortgage, Mortgage