If you are planning to buy a residential property in the future, then you should be reading up on the types of mortgage loans you could possibly get. This way, you can weigh the pros and cons of each and find the best one for your needs.
There are two main types of mortgage loans, fixed rate and adjustable rate. Here are some comparisons to help you make an informed decision:
A fixed rate mortgage has a fixed interest rate for the initial period agreed upon. The bank doesn’t have the power to make any adjustments no matter what happens to the marketplace. There are two, three, five, and 10-year fixed rate mortgages and their interest rates go up as the years pass by. After the fixed period, the lender can adjust the rates. The risk is that the borrower doesn’t have any means to know how much the new rate would be.
Adjustable mortgages rely on the marketplace’s interest rate to make the necessary adjustments. When the interest rate rises or falls, the monthly payment follows. The market index, cost of funds index, prime rate, and other index will determine the rate. Banks tend to give lower initial rates because of the risk you’re taking with an adjustable mortgage. If the risk pays off, you’ll have lower monthly payments.
No matter which type of loan you choose, you should be mindful about the additional charges that come with it. This may include arrangement fees. The best mortgage rate in Orem and other parts of Utah, therefore, is one that doesn’t come with a lot of extra charges. Factor in everything before making a decision or else you might end up with a less than impressive loan to pay for the years or decades to come.
Make sure to do your research before making a final decision. This will help you choose the right mortgage type that you are comfortable with.