Deciding on a Mortgage
If you are planning to mortgage your house or property, this is a probably the most important financial decision you will make in a long time. This is not something you rush into or decide rashly, because the consequences of failure are too drastic. Clue up and do research before entering into an agreement.
Depending on your financial situation, you can find a mortgage option that best applies to your case. Mortgages are long term loans that can last at least 10 years up to 40 years. It is therefore important that you are aware of the implications of the mortgage agreement you will be entering into with the bank. If you learn the pros and cons of each type of mortgage, it will help you decide on what type is best for you.
I have listed them below to help you make a choice.
But before anything else, you need to be sure why you are applying for a mortgage, what you need the money for. It is helpful to answer this first so you know what type of agreement is ideal for your situation.
1) Fixed rate or adjustable rate. A fixed rate mortgage is a loan that has the same interest for the entire duration of the mortgage. Would you rather have changing interest rates per month? The advantage in a fixed rate mortgage, the money you pay out is the same each month; while in the adjustable rate mortgage interest rates can go down, and you pay less for that period.
Majority of people settle for a fixed rate mortgage than for an adjustable rate. If you plan to stay forever in your property, a fixed rate mortgage is more suitable, otherwise, if you have plans on leaving the property, the adjustable rate mortgage is best.
2) Will a government insured or conventional mortgage be best for you? After deciding on what interest rate is ideal for your situation, you need to determine whether a government insured loan or a conventional one will suit you. If you are looking for a guaranteed backing from the government in case you fail in your financial commitments, then a government insured loan is ideal for you, because in conventional loans there are is government backing.
3) Will a conforming or jumbo loan be best for you? What then is the ideal type based on the size of your loan: A conforming loan or a jumbo loan? It all depends if you need only a small amount or a very big amount – how much money do you need? For smaller amounts of money, conforming loans would be ideal; but for larger amounts, you need to apply for a jumbo loan.
If you want to safeguard your home or your property from loss, it is best to study your options carefully.