We all are very much aware that buying a home is one of the major and big dreams of our entire life and mortgage plays a vital role when we are up to buying a home. So while shopping for your new home you always got to know that which type of mortgage or home loan is perfect for you and match your affordability.
Because if the mortgage type you choose does not suit your affordability level then you might be into big risk with the interest rate and other stuffs. So find below few mortgage or home loan types which are normally best suited for everyone.
A. FRM (Fixed Rate Mortgage): The specialty of this particular type of mortgage loan is you will get a locked in or fixed rate of interest (for example: 6.0%) along with a set monthly installment scheme in this type of mortgage.
B. ARM (Adjustable Rate Mortgage): Adjustable Rate Mortgage is best suited for home buyers who have flexible funds or financial resources to pay off their mortgage. Because here in this mortgage type the rate of interest reacts with the ups and downs in the industry. Means you will have to accept the current rate of interest of the market. Does not matter whether it’s high or low.
C. Negative Amortization Mortgage: If you opt for this type of mortgage loan then you will be allowed to pay a monthly installment which will be not more than the total amount of interest. However the amount of interest which remains unpaid and the balance of the principal amount will rise in this specific type of mortgage loan.
D. Interest Only Mortgage: In this type of mortgage loan buyers generally pay for 5 to 10 years on the interest amount of mortgage loan.
Check out an interesting video by bloomberg on types of mortgages:
So the bottom line is while selecting a loan option for your new home the pros and cons or merits and demerits of that particular mortgage or home loan type needs to be taken into consideration. So that you will not find yourself in any kind of trouble while paying off the loan.