If you are planning to mortgage your house or property, this is a probably the most important financial decision you will make in a long time. The consequences of failure in this regard is so life-changing, you need to think it over and over again before finally deciding. So do your homework and take time to study your options before committing yourself to a lifelong decision.
There are a number of mortgage options to choose from depending on your status. Mortgages are long term loans that can last at least 10 years up to 40 years. It is therefore important that you are aware of the implications of the mortgage agreement you will be entering into with the bank. Whatever option suits you, it is wise to study the advantages and disadvantages of each type of mortgage.
The three types of mortgage agreements are listed below.
First and foremost, you need to determine what your financial needs are, why you are applying for a mortgage. The type of mortgage that you will enter into depends largely on your need.
1) The two types according to interest rates are: Fixed and adjustable. Would the same interest rate for the entire duration of the mortgage be best for you? Would you rather have changing interest rates per month? The advantage in a fixed rate mortgage, the money you pay out is the same each month; while in the adjustable rate mortgage interest rates can go down, and you pay less for that period.
But the mortgage that most people choose is the fixed rate mortgage. Fixed rate mortgage is ideal for people who plan to stay forever in the property; while adjustable rate mortgage is ideal for those who plan on moving.
2) Will a government insured or conventional mortgage be best for you? Next, you need to determine if you want a government insured loan or a conventional one. The advantage of a government insured loan is that you have a guaranteed backing from the government; while in conventional loans there is none.
3) Conforming or jumbo loan. The next step is to determine whether a conforming loan or a jumbo loan is ideal for your situation. It all depends if you need only a small amount or a very big amount – how much money do you need? If you are only borrowing a small amount of money, then a conforming loan is enough, but if you plan to borrow a very huge amount, you need to apply for a jumbo loan.
Study your options and do your research in order for you to arrive at a safe and sound mortgage decision.