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Mortgages
There are two major types of mortgages. The
two main mortgage loans are fixed rate and adjustable rate. Both are
different so the situation and the goals of the borrower will determine
which loan is best. With that being the case, we'll simply discuss the
difference between these two kinds of mortgages without endorsing either
one.
Fixed rate mortgages have a
set interest rate that stays the same over the life of the loan. The
last payment will be the same as the first payment. This loan is not
affected at all by the up and down movement of current interest rates.
Also with the fixed rate mortgage you can rest assured that the principal is being
paid down.
Adjustable rate mortgages (ARM) are
linked to current interest rates. The payments on this mortgage loan go
up when interest rates go up and payments are lower when rates go back
down.
These mortgages can be equipped with safe
guards that protect both the borrower and the lender from sudden spikes or
drops in market conditions. This mortgage loan should contain the
following:
- Adjustment Intervals -
timeframes within the loan that allow you to adjust the rate of your
loan. Usually this adjustment can be made once every six months or
once a year.
- Caps- protective measures used
to keep the interest rate on the loan from rising above a certain
level.
Fixed rate and adjustable rate mortgages
give the homebuyer numerous options in selecting their best mortgage. We
hope this helps you find your perfect home mortgage loan.
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