How do I know which mortgage is best for me?

How do I know which mortgage is best for me? -

Selecting the perfect mortgage for your needs can be a difficult choice. You want to ensure that you will be able to make the payments, and save more money in the long run. Although there is no wrong choice when it comes to various types of mortgages, it is essential that you choose the best loan for your needs and expectations. To help you decide, we have detailed each of the three types of mortgages below.

Fixed Mortgage

The fixed rate mortgage is the most popular loan among the owners because it offers stable interest rates, which means it remains fixed throughout the duration of the loan. Following the fixed rate mortgage payments also remain the same throughout the loan period, which can last 10, 15, 20, 25 or 30 years - depending on how much you borrow and how much you can afford pay each month.

adjustable-rate mortgage (ARM)

A variable rate mortgage does not have a fixed interest rate throughout the term of the loan, the mortgage rate is fixed. Instead, the ARM interest rates fluctuate - based financial market - for the duration of the loan. Given that interest rate changes throughout the life of the loan, payments will also fluctuate. Although the payments have the potential to change on a monthly basis, people with this type of loan even have an idea of ​​how their payment will cost because the lender and borrower agree on a maximum monthly payment set when both parties sign the loan documents.

hybrid ARM

The hybrid ARM is a combination of both the fixed and variable mortgage rates. Borrowers first pay a fixed rate or introduction in the early life of the loan, the loan becomes similar to an ARM to fluctuations in interest rates - with maximum of payment agreed between the lender and the borrower. Usually the fixed or introductory lasts three, five, seven or 10 years.

How do I decide which mortgage is best?

When deciding on a type of mortgage, it essentially comes down to what you, as a borrower, are comfortable with the payment. If you prefer to have the same monthly payments throughout the term of the loan, the loan fixed rate mortgage is the best option. On the other hand, if you do not mind paying a potentially different amount each month, the mortgage variable rate is the best option for you. Finally, if you do not plan to own the home you are buying for a prolonged period of time, the hybrid ARM may be the best choice for you because you can get locked-in introductory rate - which often happens is relatively low - and eventually sell the house before the loan becomes an ARM.

Regardless of the mortgage you choose, it is important to make sure you can afford the payments and are satisfied with the loan conditions. Visit our mortgage tools to see the price of the home you can afford, as well as learn more about the mortgage process.