Types of Mortgages

When you are buying a house things can be very confusing with the move in date, closings, repairs or upgrades that you plan on doing. One of the last thoughts on peoples’ minds is the type of mortgage that they will have. If the last several years teaches you anything, it’s that you always want to be aware what type of mortgage that you will have and understand the other kinds of mortgages that you have available to you. Below are some of the more common types of mortgages.

Fixed rated mortgage: With this type of mortgage the interest rate that you receive will stay at that amount for the entire term of the loan. If interest rates start to rise your mortgage payment will stay the same. For many people this kind of mortgage gives them piece of mind knowing that their house payment will always be the same regardless of what’s happening with things.

Adjustable rate mortgage: This type of mortgage comes in two phases. One is where the interest will be fixed up to a certain amount of time. The second phase is when interest rates can be reset to higher amounts, causing your house payment to increase dramatically. In general these types of mortgages are offered to those with less than perfect credit.

Simple interest mortgage: With this type of mortgage the interest is calculated daily. These are ideal if you are planning on paying more than the minimum amount required monthly to help save you thousands of dollars in interest.

Shared application mortgage: In this type of mortgage the financial institution will give you a lower interest rate. However, in exchange for receiving a lower interest rate, they will require that you give the bank a percentage of the appreciated house value when you sell the house. In layman’s terms this means that when you sell your house or terminate the mortgage the financial institution makes a percentage of the increase in value. If you are looking for low interest rate and are willing to share some the profit down the road with the bank then this type of mortgage could work best for you.

Clearly there are wide variety of home mortgages to choose from such as: fixed rate mortgages, adjustable rate mortgages, simple interest mortgages and shared application mortgages. The one that is right for you all depends on what your financial situation is and what kind of mortgage is most comfortable for you.