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Different Types of Mortgages
Choosing the kind of mortgage that you want is going to be one of the largest decisions you will have to make
during the process of buying your home. What type you choose will effect the kind of payment you will be making for
many years down the road. Here is a listing of some of the most common types of mortgages.
Adjustable Rate Mortgage
When you have an adjustable rate mortgage, the interest rate changes every so often at a pre-determined date, like
each year or every five years. The adjustable rate mortgage generally has a very low introductory interest rate, but
it will most likely rise over the years as the market changes. This type of mortgage can also be referred to as a
variable rate loan.
Fixed Rate Mortgages
A fixed rate mortgage is the most popular kind of loan because the interest rate remains the same the whole time you
are paying the money back. Most people like this arrangement because they enjoy the security of knowing their
payments are not going to go up dramatically.
Balloon Mortgages
This type of mortgage is calculated like it will be paid back over a 30-year period, but after five years, the entire
balance has to be paid all at once. The balloon mortgage works out well for people who expect to sell their house
before the five-year period is over.
Jumbo Loans
A jumbo loan will normally exceed $300,000, or whatever the federally-established limit is. This type of loan
generally has a higher interest rate than most standard mortgage loans.
Lease-Purchase Mortgage Loans
The lease-purchase mortgage loan is ideal for people who can not afford to make a down payment up front. In this
situation, rent is still paid each month, but instead of going to a landlord, the money is put towards a down payment
and first mortgage.
Shared Appreciation Mortgages
This kind of mortgage offers lower rates and payments. The reason for this is you must share some of the
appreciation in value on your property with your lender. This type of mortgage is not available everywhere, so you
may have to do some shopping around to find it.
Land Loans
This is the kind of loan you would get if you are purchasing a piece of property to build on. Interest rates and
down payments are generally higher on these types of loans because it is a riskier venture for the lender.
Remember, do not let anyone talk you into what type of mortgage you should have. Looking over your options
independently or with the person that you are purchasing a home with will ensure you make the best decision.
Another thing to remember is to shop around and find the most appropriate type of mortgage loan for you. Interest
rates and options are changing all the time, so check them all out before making a final decision.
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