Mortgages come in all shapes and sizes, meaning there is one that is right for your financial situation.
When you decide you want to purchase a home, finding and getting a mortgage can be a terribly confusing process because there are just so many options from which to choose. Don’t let all the names scare you because you can categorize each one into primarily two kinds of mortgages. Once you understand what is what, you are one step closer in figuring out which mortgage is best for you.
What is a mortgage?
Before we get into the good stuff, we should know what exactly we’re getting ourselves into. A mortgage is a loan that allows you to purchase real estate and pays for the gap between your down payment and the purchase price. Of course, it’s only a loan so you will have to pay it back–with interest.
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Fixed-Rate Mortgage
The first kind of mortgage we’ll dive into is called a fixed-rate mortgage. It’s a loan that has a fixed interest rate, meaning that it won’t change no matter what happens to the economy. If interest rates go up, yours will stay the same. If, however, interest rates go down, yours will not drop with the economy. It’s a risk, but many choose this because it reduces interest rates over the life of the loan.
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Adjustable-Rate Mortgage (ARM)
Unlike a fixed-rate mortgage, the adjustable-rate mortgage interest rate flows with the economy. To start out, the interest rate is low–really low. After the initial term expires, your interest rate is at the mercy of the economy. Meaning it could be good if interest rates go down, but it can also backfire if interest rates go up.
Do you know what mortgage is right for you? Contact Elvin Wesley at Ranch & Coast Mortgage Group Inc. for all of your home loan needs throughout Solana Beach and San Diego County, as well as all of California.
