Home Loan Facts. Tips about Mortgages
Most types of loans tend to fall into two major categories: fixed or adjustable rate. These two types of loans are very different and they work for different types of borrowers. Here is a brief summary of the differences:
Fixed rate mortgages (FRM): These are mortgages with an interest rate that stays constant for the entire duration of the loan. Fixed rates have longer terms (15-45 years) and higher interest rates than adjustable rate mortgages but are not at risk for changing rates. This kind of loan is best if you can afford a slightly higher mortgage payment, have good credit and want to make sure your interest rate will not increase in the future.
Adjustable rate mortgage (ARM): Mortgages where the interest rate changes periodically based upon a standard financial index. ARM's offer borrowers lower initial interest rates with the risk of rates increasing in the future. In comparison, fixed rate mortgage (FRMs) offer a higher rate that will not change for the length of the loan. ARMs often have caps on how much the interest rate can rise or fall. This kind of loan is best if you want a lower mortgage payment, have some credit issues, or think that interest rates will drop in the future.
Common Questions
- How do I know if I am considering the right
type of home loan?
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This is a critically important question. The bottom line is that you should be easily able to...more - What about Fixed Rate Mortgages?
The majority of home loans you are likely to find are fixed-rate mortgages. These home loans usually have a span of...more - What is an Adjustable Rate Mortgage?
As the name indicates, the rates are changeable. This makes it possible to receive very low rates for...more - Are Bad Credit Mortgages Still Available?
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