Know your mortgage type!

Mortgage types and interest rates are varied and numerous. Too numerous in fact, that picking the one best for your current situation is a challenge.

Here are the types of mortgages normally available and the run-down on their pros and cons.

Low Interest Rate Mortgage
A low interest rate mortgage, who doesn't want one? The thing to remember here is that nothing's perfect. To set up this kind of deal, you might want to think of hiring a mortgage broker. You can negotiate the deal yourself but having sound advice can be helpful.

The mortgage broker will do some of the steps for you. A good thing going here is that your broker may know of organizations that offer a smaller interest rate than a bank. Downside is that your broker may not look into all possible lenders. There might be some bias as to which company your broker may suggest, they are after all looking out for their own interests. Do your own checking too and you might find a sweeter deal than he does.


Fixed Rate Mortgage
A large number of people choose this type because feel more stable in knowing that there will be no increase in the payments they'll be making. This type guarantees a specific interest rate for a period of time, which is a great source of relief. No need to watch interest rates like a hawk!

Mortgages like this can be as short as 6 months or as long as ten years, though for extended periods like these, you might be obligated to pay for the benefit of unchanging interest rates,


Interest Only Mortgage
A smaller payment, good isn't it? But then again, maybe not. In this arrangement, you agree to pay only the interest on the mortgage. Less stress on your pocket. After a period of 5-10 years, you may begin to pay the principal at a fast rate or you can take the balloon mortgage approach. A balloon mortgage approach means you will pay the total loan at the end of the term, which could become a problem if you don't have the money.

It may not be the best choice for home mortgages but investors are looking on this very favorably. This is ideal for short term ownership. Choosing a balloon mortgage approach, they could sell the house at the end of the term and the returns become the payment for the loan.


Assumable Mortgages
As the term suggests, you can "assume" these notes, meaning these are mortgages passed from owner to owner. It is very satisfactory if the interest rate on the existing mortgage is better than setting up a new one. When you assume a mortgage, you take it as it is. Make sure that the options included in the deal are favorable for you.

Also you need to have a big down payment to assume a mortgage. The amount has got to be enough to pay for the difference in the house and mortgage value. If you're short on cash, you might need to settle a second mortgage. Avoiding a second mortgage is high priority, since they are usually at a much higher interest rate.


Adjustable Rate Mortgage
In this deal, the payments the clients dole out will change as interest rates adjust. In most transactions, clients start with a fixed rate within a specified time period. This could be within 6 months to a full year. After this the interest rate is adjusted. If rates go down, payment follows and vice versa,

Now, this isn't such an unfair arrangement. You benefit a great deal, especially if the rates stay low for extended periods. If you are interested in such an arrangement, the ideal thing is to take a short fixed term and then take advantage of current interest rates. Bear in mind that in some situations, an adjustable rate mortgage can cost more in the long run. Check everything and ask for advice.


Reverse Mortgage
Technically speaking, this isn't actually a real mortgage at all. In this deal, the conditions allow the owner to get a hold of some of the value of property without having to sell it. You can get a cash value from your property. It's like you're borrowing money from