Types of Loans
Fixed vs. Adjustable
A mortgage loan is one that allows you to purchase a home, closing the gap between the money you have for a down payment and the purchasing price of the home. Since few people can afford to buy a home all at once, a home mortgage allows for future planning. This is where the consumer must make a decision based on income, assets, and expenses as to how much they can afford to pay over the life of the loan.
The best thing to do is to sit down and come up with a budget before you talk to anyone. That way you don’t end up biting off more than you can chew. Also, understanding the different types of loans will help you to make an informed decision that you don’t regret later.
Fixed Rate Loans in Atlanta
Whoever said that being predictable was a bad thing was not talking about mortgages. The one good thing about a fixed rate loan is that the rate will never change regardless of what the economy does. If the prime interest rate goes up, you do not have to pay the difference; instead the lender does. With a fixed rate, your monthly principal and interest payment never changes. This is a plus for most people because they can budget. The bad thing about a fixed rate mortgage is that you are going to have to pay for that predictability. Usually fixed rate loans come with a higher interest rate than an adjustable rate.
Adjustable Rate Loans in Atlanta
With an adjustable rate mortgage (ARM) the rate will adjust periodically over the life of the loan. Usually the terms of these loans are in 3, 5, or 7 years, and during that introductory period the rate will not change. However, when the rate does change, it can be very unpredictable. With this option the payments of your loan will rise and fall with the average interest rate. The good thing about starting with an ARM is that the rates are usually a little lower than a fixed rate loan.
There are other types of loans, such as balloon, FHA, VA, or interest-only loans, however, the fixed and adjustable rate mortgages are the most common. They are the most popular options because they make sense for most people. Call Simply Direct today in order to discuss your options.
Also see Specialty Loans