When you get a loan for a home, you will have to deal with the loan for many years to come. If you make a bad decision when choosing a loan, you will have to continue to pay for your mistake for many years to come. Because you might need to act quickly in order to get a home that you want, it is a good idea to research what loans are available to you before you go house hunting.
One of the most common types of loans is the fixed-rate loan. The whole point of the fixed-rate loan is to lock in an interest rate. How long you have to deal with a fixed-rate loan depends on how long your mortgage lasts. There are two keys to getting a low interest rate:
1. The longer the term of a loan is, the lower your payments are.
2. The lower your interest rate is, the lower your payment is.
Thus, if you know that interest rates are not likely to get any lower, or that interest rates are projected to get higher, you should consider locking in a fixed-rate mortgage, so that no matter what happens with interest rates in the future, your payments won't be affected.
Unlike fixed-rate mortgages, the interest rate on adjustable-rate mortgages, or ARMs, changes. How often the rate changes will depend on the terms of the loan. Some ARM loans will have a fixed mortgage for a set period of time and the mortgage will change every year thereafter. Other ARMs will have an interest rate that changes from year to year for the life of the loan. Thus, the key to getting a good deal on an ARM is to know the terms of the loan. The best reason to consider an ARM is if the interest rates are high. With an ARM, you won't be locked into a high-interest rate, so they can make a good choice for buying a home when you don't want to be stuck with a high-interest rate for the life of your mortgage.
The root word in the term mortgage is "mort," which means death. The idea is that you just might be stuck with your loan until you die. Thus, before you enter into a mortgage, you need to make sure that you are getting a good deal. Knowing the market and knowing what loans are available from places like CU Mortgage Service will help you to make a good choice for a home loan.