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By Carrie Reeder
If you are currently looking for a new home, chances are that
in all the excitement you won’t really give any thought to the
type of home loan mortgage you take out, instead going with
the
first one offered to you. This could be a serious mistake –
costing you thousands, if not tens of thousands. Make sure you
know all about the different types of home mortgage loans
before you starting looking for that new dream home!
Here are some of the basic types of mortgage loans:
Fixed-rate home loan mortgage -
As the name suggests, this is a plain-vanilla home loan.
Basically you borrow a certain amount over a certain period at
a fixed rate of interest. You then pay the same monthly
installments for the life of the home loan. The benefit of a
fixed-rate home loan is that you can easily budget for the
repayments. The downfall of a fixed-rate home loan is that you
could end up paying a higher rate of interest than everyone
else – no one knows what interest rates will be in 15-20 years
time!
Adjustable-rate home loan mortgage -
Mirroring the fixed-rate mortgage is the adjustable-rate
mortgage. Again, you borrow a certain amount over a certain
period, however in this case the interest rate is not fixed,
but is adjustable (or ‘floating’ as you may also hear it
called). The upside to adjustable-rate home loans is that the
interest rate at the start of the loan period can be lower
than
the fixed rate would be. The downside is that it is difficult
to
budget for, as the amount can change, and you are at the mercy
of something outside of your control – interest rate
fluctuations, which can change quickly.
Hybrid home loan mortgages -
Trying to fill the void left with the downside of the fixed
and
adjustable/variable-rate home loans, the hybrid home loan lets
you fix the interest rate over the first part of the home
loan,
and then switch to an adjustable/variable rate later. The
upside
of hybrid home loans is that they allow you to budget for your
repayments during the expensive time when you first buy the
home. The downside is that if floating rates are much higher
than your fixed rate when the switch happens, you could find
you are paying a much higher repayment each month.
About The Author: To see a list of recommended mortgage loan
companies online, visit this page:
www.abcloanguide.com/mortgageloans.shtml - Carrie
Reeder
is the owner of ABC Loan Guide, an informational website with
articles and more about various types of loans.
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