Deciding on a Mortgage
A mortgage on your house or property is a very huge financial commitment. Rushing into a decision on this matter is a very bad idea that can cause you huge losses and lots of headaches. It is best to sit down and do a lot of thinking and research, because the decision is so crucial.
Depending on your financial situation, you can find a mortgage option that best applies to your case. Mortgages are long term loans that can last at least 10 years up to 40 years. It is therefore important that you are aware of the implications of the mortgage agreement you will be entering into with the bank. You can get a good idea of what type is best for you if you look into some of the advantages and disadvantages of each type of mortgage agreement.
I have listed them below to help you make a choice.
First and foremost, you need to determine what your financial needs are, why you are applying for a mortgage. This should guide you in determining the type of mortgage that suits you.
1) Fixed rate or adjustable rate. Would the same interest rate for the entire duration of the mortgage be best for you? In an adjustable rate mortgage, on the other hand, the interest rates change. To some people, paying the same amount each month is an advantage, but to others the possibility of paying a lower amount has a great appeal.
But the mortgage that most people choose is the fixed rate mortgage. Fixed rate mortgage is ideal for people who plan to stay forever in the property; while adjustable rate mortgage is ideal for those who plan on moving.
2) Will a government insured or conventional mortgage be best for you? Next, you need to determine if you want a government insured loan or a conventional one. There is no government backing in conventional loans, but the advantage of government insured loans is that you get backed up by the government in case of mortgage failure.
3) Conforming or jumbo loan. The next step is to determine whether a conforming loan or a jumbo loan is ideal for your situation. How much money do you want to borrow, is it just a small amount or a very large amount? If you are only borrowing a small amount of money, then a conforming loan is enough, but if you plan to borrow a very huge amount, you need to apply for a jumbo loan.
Study your options and do your research in order for you to arrive at a safe and sound mortgage decision.