A mortgage loan is not a one-size-fits-all solution to purchasing a home.
In fact, there are many types of loans and ways a loan can be structured so that it’s the best fit for you and your bank.
So what’s a mortgage? It’s a loan given by a bank or lending institution to finance a property. The loan is secured with a lien against a property.
When you purchase a home with a mortgage loan, you agree to repay the money based on the terms and conditions outlined in the financing documents.
A variety of mortgage loans and mortgage assistance programs are available today.
What does fixed vs. adjustable mean?
The biggest difference in fixed rate compared to adjustable rate mortgages is the way the interest works.
The fixed rate mortgage is the most common type. Within this loan, the interest rate remains the same over the lifetime of the loan.
What are the benefits? With a fixed rate, the interest you have to pay doesn’t change, so it’s easy to predict exactly what your payment will be each month. Even if the interest rate environment changes and mortgage rates begin to rise, yours is locked in.
An adjustable rate mortgage, on the other hand, has an interest rate that is not set. Instead, the rate adjusts as market interest rates fluctuate. (Most ARM mortgage rates adjust annually, but it might vary so check with your lender about your loan’s specific schedule.)
With an ARM, your interest rate is the only part of your loan that may change and impact your monthly payment. The length of your loan and your monthly principal won’t change (except as you pay it down).
Always compare ARM and fixed-rate mortgages with your lender to choose the loan to meet your current needs and future goals.
How do you choose the life of the loan?
The term length of your mortgage loan refers to how long you have to pay off the loan.
Mortgages that are 15 years or 30 years are the most common, but other terms may be available.
The life of the loan also affects your payments. On a 30-year mortgage, you’ll generally have a lower monthly payment compared to a 15-year mortgage. However, you’ll pay more in interest over the life of the loan with a longer term.
When considering your term length, you also need to think about your personal life plans. How long do you plan to stay in your new house? This may affect the mortgage option you choose. For example, if you plan to stay in your home for decades, an adjustable rate mortgage may be much riskier than if you plan to move in five years.
How does INB help find the right loan options?
Sometimes people don’t pursue buying a home because they aren’t sure what down payment they need, what their monthly payments will look like or what their options are. INB lenders are happy to sit down with you and talk about your unique situation and calculate real numbers for you.
When you first meet with an INB lender, we start by asking questions like:
- What is your rent now?
- What payment are your comfortable with?
- How long do you plan on staying in the home?
- What is your current income?
The answers to these questions allow us to tailor your loan to your situation. The right program for one person may not be a good fit for another because of the factors that come into play.
Want to learn more? If you’re considering buying a home this year, our INB Mortgage team is ready to sit down with you and talk through all of your options.
Give me a call today.