What Kind of Mortgage is Right For Me?

When the time comes, you will need a mortgage for your home. This decision will have an effect on you, so you need to make it the correct one. There are some factors you need to consider when you research the best mortgage for you.

Choosing A Mortgage

Choosing a mortgage will be one of the most important decisions of your life and it is important to choose the right one. Most mortgages are paid using amortization. Amortization consists of monthly payments and contains a capital element and an interest element. At the beginning of your mortgage you will mostly be paying the interest and toward the end you will mostly be paying capital. These mortgages usually last between 15 and 30 years.

Choosing an Interest Rate

Choosing an interest rate is important as well. There are two main types of mortgage interest rates. Fixed rate mortgages (FRM) and adjustable rate mortgages (ARM). A fixed rate mortgage locks in one interest rate for the entire length of the loan. This is nice because you will always know what your interest rate will be and you never have to worry about it going up. In exchange for the security of this interest rate your initial rate will be a little higher than average. An adjustable rate mortgage is the opposite. Your mortgage rate will change based on a market index rate. If the market rate is down you will be paying a lower interest rate, if it rises then you will be paying a higher interest rate. Usually with an ARM the initial interest rate is lower. Which could be very helpful. But crunch the numbers, because a low initial interest rate can be nice, but useless if you end up paying a lot more in the long run.

Do Your Research

Choosing one of these options can be hard. Maybe in a few years you realize you may have made the wrong choice. If this happens you can always refinance your mortgage. When you do this your interest rate may go up a little bit but it will be worth it to lock in the type of rate you want. Choosing a mortgage can be a tough decision, it is best to do your research and talk to different financial institutions. Even if you make the wrong decision you can always refinance. But you want to do your best to make the right, sound decision the very first time. So research all your options before you make a decision. This is a decision that should not be rushed.