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While shopping for a mortgage loan, it’s important to understand your options and their effect on your budget.
Adjustable vs. Fixed
A fixed – or adjustable-rate loan is the first major decision to take. In a fixed-rate mortgage, the same interest rate continues for the life of the loan and your monthly payments of principal and interest will continue to be the same.
Because of this stability, homeowners can plan their finances for the future. They are especially attractive when you can lock a low rate during a volatile market.
An adjustable-rate mortgage offers a lower rate during an introductory period. After this period, the rate adjusts annually depending on the financial markets.
If you don’t plan on living in a house for a very long time then adjustable-rate mortgages can be a less expensive option.
The term of the loan
The next decision to be taken is, do you want a 30-year mortgage or a 15-year mortgage?
It is no rocket science to guess that the overall cost of a mortgage will be less for 15 years than 30 years because as the term is low the total interest is also less, but the monthly payments are higher.
If you can afford then a 15-year loan might be a better choice so you are mortgage-free soon.
However, with a 30-year loan, the lower monthly payments could let you use the funds to pursue other financial goals.
Talk to your trusted lender about your life and plans to make sure you get the loan that is best for your situation.
Reference Source: North Shore Beacon
