When it comes to choosing a mortgage loan there is no one size fits all option that works for everyone. Because there are so many factors to consider when choosing the mortgage that is right for you, it can be difficult to know if you are choosing the right one. A professional mortgage broker has access to many different types of mortgage loans, as well as many different mortgage lenders, so they can help you feel confident when making your mortgage decisions. A professional mortgage broker will be able to explain in detail each mortgage option you have available and will be able to “shop around” for the best mortgage term offers for you. Use a professional mortgage broker to ensure you are getting the terms that are right for you and not spending more than you need to on your next home mortgage.
The Term Of The Loan
The term of your mortgage loan is the amount of time it will take for you to completely repay your mortgage loan back. Mortgage loan terms range from 10 years to 30 years. When determining the term of your mortgage loan that is going to be right for you the two main factors to consider are what you want your monthly payments to be and how long you want to make monthly payments for. Generally speaking, you have two options: larger payments over a shorter amount of time or more interest paid through smaller payments over a longer period of time.
- Shorter Terms will typically have lower interest rates and a lower overall cost but will have higher monthly payments because you don’t have as much time to pay back the loan.
- Longer Terms will typically have higher interest rates and a higher overall cost but will have lower monthly payments because you have more time to pay back the loan.
The Type Of Interest Rate On The Loan
The type of interest rate on your mortgage loan will affect your overall monthly payments in different ways. The two main options you have when choosing a mortgage loan are choosing between a fixed rate mortgage and an adjustable rate mortgage.
- Fixed Rate Mortgages are generally 15, 20, or 30 years long in their term. The interest rate on the loan remains constant, so your monthly mortgage payment remains the same throughout the life of the loan. With a fixed-rate mortgage loan you can rely on stability in your monthly mortgage payment, spread payments out over a longer term to lower your monthly mortgage payment, and you don’t have to worry about your mortgage rate increasing in the future.
- Adjustable Rate Mortgages (ARM) generally begin with a lower interest rate than a fixed rate mortgage loan does within the first five to seven years of your loan, and then the interest rate changes based on the market. With an ARM loan you have the benefit of a lower interest rate in the beginning of your term, after the initial term of your loan your interest rates can then increase or decrease with the market, and there are rate caps that limit the amount your interest rate can go up or down. ARM loans are a great option for buyers who are not planning on staying in their homes long-term as they save the buyer money in interest rates early in the term of the loan.
Contact American Dream Home Mortgage today to begin your home buying process with one of our professional mortgage brokers. We look forward to working with you to determine which type of mortgage loan you want, what terms and conditions you want to have included in your mortgage loan and shopping your mortgage loan options with different mortgage lenders to find the right loan for your needs.