Mortgages - What Types Are Available and Best For Me?
By Scott Bradley

Mortgage types and interest rates have more variety than doughnuts. These are a few examples of basic mortgage types. Mortgage Types over the past 30 years, have changed in many ways with new features that benefit consumers. Mortgage types usually fall into one of three categories including, conventional, variable and government.

Mortgage Types

Mortgage providers are now legally bound to present customers with a key facts document. Mortgage fees have been rising of late as providers reduce their headline annual percentage rates to attract new business. Mortgages by their very definition are loans that are secured on the open market. A professional mortgage adviser can guide you through the application process and help you to choose the right mortgage product to suit your personal circumstances, now and for the future. Some lenders offer mortgages that meet specific needs, and consumers can benefit from them. Secondly, all the various mortgage programs may be classified as fixed rate loans, adjustable rate loans and various combinations.

Fixed

Fixed or adjustable rate: Which is right for you? Fixed rates are popular because you know exactly how much you are going to be paying each month, and for how long. Your payments can not be affected by rises in the Prime Rate. If you think interest rates will rise or you prefer to have some certainty about your repayments over the term of the loan, a fixed loan may be more suitable. Fixed Rate Mortgage payments are fixed over the life of the loan. Interest rates do not change and are protected if rates go up. You can refinance if rates go down.

Credit

Each loan specifies a certain borrower profile that determines the borrowers creditworthiness, rates and terms. Eligibility of the borrower is still credit-driven. Fannie Mae and Freddie Mac guidelines establish the maximum loan amount, borrower credit and income requirements, down payment, and suitable properties. Loans that do not meet the borrower credit requirements of Fannie Mae and Freddie Mac are called \'B\', \'C\' and \'D\' paper loans. B/C loans are offered to borrowers that may have recently filed for bankruptcy, foreclosure, or have had late payments on their credit reports.

Term

Terms range from three months to thirty years. Generally, the shorter the term of a loan, the lower the interest rate you could get. With the traditional 30-year fixed rate mortgage your monthly payments are lower than they would be on a shorter term loan. The payments on fixed rate fully amortizing loans are calculated so that at the end of the term the mortgage loan is paid in full. Balloon loans are short-term fixed rate loans that have fixed monthly payments based usually upon a 30-year fully amortizing schedule and a lump sum payment at the end of its term. Usually they have terms of 3, 5, and 7 years.

There are many different mortgage types available, each offering slightly different benefits. Before making a decision, look carefully at all the different mortgage types and lenders, taking into account any setup fees that may apply.

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