What are the different types of mortgage loans to opt for?

Are you in need of instant cash for buying your home? If yes, then you should know that there are different types of mortgage loans you can take out to get money for your home. A mortgage loan is a kind of loan that you take out to purchase your home. In order to take out this loan, you will have to keep anything as collateral against it.

mortgage loans

However, it is not that easy to choose a particular type of loan for your need. With several lenders in the loan market, you’ll find it difficult to understand whom you may choose. As such, shop around carefully to select the right lender and then take out the home loan.

When any home buyer jumps into the loan market, he makes it a point to know the pros and cons of different mortgage loans. So, if you are planning to take out a loan, make sure you know about the different types of home mortgage loans.

Fixed rate mortgage – Fixed rate mortgage, also called FRM, is a type of loan in which you will have to pay same interest rate throughout the loan repayment period. The main advantage of choosing this loan is even if the rate of interest in the market increases, your mortgage payment will not get affected in anyway. As such, you’ll continue making the same payment throughout the loan term period. You need to know that the term period of this type of loan is generally 15 to 30 years.

Balloon mortgage – If you want to take out a balloon mortgage, then you need to know that the advantage of this loan is you can make low monthly payment for at least some years. Once the loan term period gets over, a part of the principal amount will be left out. You will have to make the lump sum payment completely. This lump sum payment that you’ll have to make on your loan is called “balloon payment”. This means that you’ll either have to pay down the entire principal amount or refinance your present home loan.

Adjustable rate mortgage – Adjustable rate mortgage or ARM is another kind of finance loan in which the monthly payments and the rate of interest remains fixed initially but it may increase or decrease depending upon the loan market. Most home buyers feel tempted to take out this loan since they can pay low interest rate primarily but they forget about the change in interest rate in future. The bank will assess your credit history and income before approving your home loan request.

Interest only mortgage – If your income is based on commission, then you may prefer to take out interest only mortgage loan. In this home loan, the borrower will have to pay only the interest on the loan for a definite period of time. This loan may be of great help for the home buyers who wish to take out a bigger home loan but can’t afford to make high monthly payments for a certain time period.

Author bio: Peter is a smart blogger who writes about finance, loans, making money, etc. He recommends checking out www.goodfincancialcent.com for getting some good information on finance.