A mortgage is a loan for the acquisition or refinancing of a house or land and there are different types of mortgage loans to suit different needs and buyers. It is very vital to understand the type of mortgage given before signing the contract because it will determine the amount of interest rate to be paid.
Types of Mortgage Plans
Basically, there are two major types of mortgages – fixed and adjustable rate. These two types are majorly differentiated through the stability of interest rate. More can be found here.
This is the most popular mortgage type amongst homeowners and buyers. A Fixed-rate mortgage is more preferred because it has a stable interest rate throughout the loan repayment period. There are times when rates fluctuate and either increases or decreases, but, a fixed-rate is not affected by any of these. Examples of fixed-rate mortgages are Federal Housing Administration (FHA) and VA. The FHA allows the borrower to lay down a small amount of money, while the VA is given to elders in the community. Learn more about San Diego Mortgage Brokers Vs San Diego Real Estate Agents.
The rates for an adjustable mortgage is fixed for a particular period of time, after which it fluctuates according to the general interest rate. Some common types are ARM, 3/1, 7/1, 10/1, etc.
There are other types of mortgage plans available, however, ensure you weigh your options well before selecting the right mortgage plan.
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