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Compare Mortgages

Mortgages are apart of all of our lives at one point or another. It is important that you understand the mortgages that are available to you. Once you understand the mortgages that are available you will need to compare these options. First let’s look at the different types of mortgages you have available to you.

Fixed Rate Mortgages:
Fixed rate mortgages offer you a mortgage with a fixed interest rate for the duration of the loan. This means that you will have a fixed monthly payment as well. Most of these loans will be thirty years in duration, but you can choose specific amounts of time if you think you can afford a higher payment for a lower amount of time.

Variable Rate Mortgages:
Variable rate mortgages have increasing interest rates over time. This means that after two years of having the loan the interest rate will start to increase. The monthly payments will also increase and they are generally higher than fixed rate mortgages. After the initial interest rate period the interest rate can rise every six months. Most often this type of mortgage is used for investment homes or for those who need a sub prime loan.

Capped Rate Mortgages:
Capped rate mortgages are part of variable rate mortgages. This means that when you have a variable interest rate and you don’t want it to rise above a certain rate you can try to obtain a capped rate mortgage. The interest rate will never be able to rise above that interest rate during the life of the loan. It can make a variable rate mortgage a little easier to deal with.

We should also discuss the difference between sub prime and prime lenders. Prime lenders are banks and other lenders who are willing to loan to good or excellent credit history for great rates and mortgages. These types of lenders rarely take risks. A sub prime loan is going to be a higher interest rate for the individual, which means they are taking a larger risk when someone has credit history issues. These loans can be easier to get, but they are not always the greatest option for someone.

When you have mortgages you also have the option of re- mortgaging down the road. This means that sometimes when you have a sub prime loan and just need a few years to work out the differences for a prime loan you can be in your home, creating a better credit history. Then you can re- mortgage the home and get a better interest rate and other type of loan.

With the many choices in mortgages that you have you want to make sure you understand how everything works and that you have read all of the paper work. This is especially important if you are a first time home buyer. There are often things you learn later that could have saved you such as not to obtain an interest only loan if it is for a primary residence and you have other options.

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