About New Home Mortgages

Choosing a new home mortgage is a major decision in one’s life. Gathering all the facts, doing research and knowing general information is absolutely essential when one sets out to find a new home mortgage. What time of mortgage do you need? There are two main types of mortgages: (keep in mind both types of mortgages may not be available to you at all times)

Amortization: This is the most common type of mortgage. In amortization mortgage payments are made monthly and contain capital and interest elements. At the beginning of the amortization the interest payments are high and the capital payments are low. This flip flops as the loan gets near maturity. Amortization loans usually are 15 or 30 years long.

Interest Only- Interest only is the alternative to Amortization, however it is not as common. With interest only loans a regular payment is made to a separate investment plan which builds up a sum of money that is used to repay the mortgage when it finally matures. Interest only loans are seen as a little more risky because you will be paying off the loan at the end of its term.

Once you choose what type of loan you want you then have to decide on the interest rates. There are two main types of interest rates: Fixed mortgage rates and adjustable mortgage rates. A fixed mortgage rate is predictable because it is fixed. You will pay the same interest rate for the entire life of the loan. There is a benefit to this stability but it will also cost you. A fixed mortgage rate will usually be a tad hire then if you went the adjustable route. It is nice knowing you only have to pay one rate for the entire life of the loan but also if actually interest rates are lower you are stuck with a higher interest rate because it is fixed.

An adjustable mortgage rate is the alternative and like a fixed rate it has its pros and cons. Adjustable mortgage rates are not set in stone. Unlike a fixed mortgage rate they will fluctuate based on the market interest rate throughout the life of your loan. This can be beneficial because you could end up paying a lower interest rate then you originally though, also the beginning rate will be lower then a fixed mortgage rate. However there are fallbacks, if the market interest rate suddenly sky rockets then you will be paying a lot more then if you had a fixed rate.

Picking a loan type and choosing an interest rate is a very important decision. It is imperative that you do research and ask questions before you jump into a decision. Your financial institution should have a lot of information on the subject.

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