If you are currently looking for a new home,
chances are that in all the excitement you won’t really give any thought to
the type of home loan mortgage you take out, instead going with the first
one offered to you. This could be a serious mistake – costing you thousands,
if not tens of thousands. Make sure you know all about the different types
of home mortgage loans before you starting looking for that new dream home!
Here are some of the basic types of mortgage loans:
Fixed-rate home loan mortgage -
As the name suggests, this is a plain-vanilla home loan. Basically you
borrow a certain amount over a certain period at a fixed rate of interest.
You then pay the same monthly installments for the life of the home loan.
The benefit of a fixed-rate home loan is that you can easily budget for the
repayments. The downfall of a fixed-rate home loan is that you could end up
paying a higher rate of interest than everyone else – no one knows what
interest rates will be in 15-20 years time!
Adjustable-rate home loan mortgage -
Mirroring the fixed-rate mortgage is the adjustable-rate mortgage. Again,
you borrow a certain amount over a certain period, however in this case the
interest rate is not fixed, but is adjustable (or ‘floating’ as you may also
hear it called). The upside to adjustable-rate home loans is that the
interest rate at the start of the loan period can be lower than the fixed
rate would be. The downside is that it is difficult to budget for, as the
amount can change, and you are at the mercy of something outside of your
control – interest rate fluctuations, which can change quickly.
Hybrid home loan mortgages -
Trying to fill the void left with the downside of the fixed and
adjustable/variable-rate home loans, the hybrid home loan lets you fix the
interest rate over the first part of the home loan, and then switch to an
adjustable/variable rate later. The upside of hybrid home loans is that they
allow you to budget for your repayments during the expensive time when you
first buy the home. The downside is that if floating rates are much higher
than your fixed rate when the switch happens, you could find you are paying
a much higher repayment each month.
About the Author: To see a list of recommended mortgage refinance
loan companies online, visit this page:
www.abcloanguide.com/refinance.shtml. Carrie Reeder is the owner of ABC
Loan Guide, an informational website with articles and more about various
types of loans.