Know Your Mortgage Options When Buying Or Refinancing A Home

When people think of a mortgage, they tend to think of the 30-year fixed-rate mortgage that is so popular among homeowners. However, there are some other options for mortgages that you should be aware of if you are buying a home or refinancing. 

Fixed-Rate Mortgage 

A fixed-rate mortgage will have an interest rate that is locked in for the duration of the loan. However, fixed-rate mortgages do not need to be 30 years long. While 30- and 15-year fixed-rate mortgages are very popular, it is possible to get a loan that doesn't fall into either of those two-time frames. Work with your mortgage lender to find out what they can offer you, even if it means that you won't be receiving a traditional fixed-rate mortgage length. 

Adjustable-Rate Mortgage

An adjustable-rate mortgage starts with a fixed rate for an introductory period. Once that introductory period is over, the rate will adjust based on the current interest rates at the time. An adjustable-rate mortgage tends to have a low-interest rate for the introductory period, but it jumps up when it is over. This makes an adjustable-rate mortgage great for someone that doesn't plan on staying in their home very long and just wants the cheapest rate possible while they are living there. 

Balloon Payment Mortgage

A balloon payment mortgage is typically for a short time period, which gives you a low monthly payment as well. However, when the loan period is over there will be one large payment that needs to be made. This is known as a balloon payment, and you definitely need to plan for it so that you have the funds in time to pay it off. If not, you can refinance your mortgage for what you owe with the balloon payment.

Interest-Only Mortgage

An interest-only mortgage starts with a period where you only pay interest on the loan. Then the mortgage payment changes to include both principal and interest. This type of mortgage is used when someone knows their income will increase in the future and they can afford the higher payment later on. 

Jumbo Mortgage

If you are buying an expensive home, it's likely that you'll need to get a jumbo mortgage. Conforming loans having a limit, and if your loan exceeds that amount it is not considered a conventional loan. Jumbo loans have more strict requirements for qualifying and higher interest rates because they are riskier for the lender. 

For more information, contact a company like Great Lakes Credit Union.