Types of Fixed Rate Home Mortgages
Buying a home can be a daunting task attributable to the high prices that quality homes attract. Making cash payment for homes is close to impossible for many, making loans the most suitable option to finance the purchase.
The most popular type of funding among those who wish to own a home is the fixed rate home mortgage, wherein the borrower pays the same amount every month. Here are the most common types of fixed rate home loans.
This type of fixed rate mortgage favors those who receive their salaries twice a month. A bi-weekly mortgage gives a homeowner the opportunity to make the payment twice in one month.
40, 35, 15 and 7-year mortgages
The 40-year fixed rate mortgage is not common with most lending institutions. For those who are fortunate to find an institution that offers it, you should know that it attracts the lowest interest rate. The 15 and 30-year mortgages, meanwhile, are more popular with lending institutions and are mostly given for commercial property. They also have a higher interest rate as compared to 40-year mortgages.
The balloon mortgage provides the homeowner with the opportunity to make agreed upon monthly payments for a period of five to seven years. He or she will then be required to make a lump sum payment of the remaining amount of the mortgage at the end of the period. You should know that this kind of mortgage comes with a contingency that if the homeowner is unable to make the lump sum payment at the end of the period, the loan may be converted to a conventional fixed rate mortgage.
The main advantage with fixed rate home mortgages is that they give the owner some peace of mind and the ability to budget for they know their monthly payments well in advance. For you to get a home mortgage that suits you, it is advisable to consult a mortgage planner. It also pays to have the right lender offer you a mortgage.