Mortgages come in many different types. Before you start looking at real estate to live or invest in, you need to decide what type of mortgage is right for you. It is a good idea to inquire with several banks and lending companies to see what is available. The information given below is not meant to be a substitute for seeking professional advice.

The type of real estate loan most people get is a fixed rate mortgage. This is a good mortgage to get when you are certain you will be living in your home for the entire loan length. Most fixed rate loans have either fifteen or thirty year terms.

While fifteen-year mortgages have higher payments, you will pay less interest on the loan. Paying off a loan of that length also means you will completely own the real estate a lot sooner.

As the name suggests, a fixed-rate loan has an interest rate that stays constant over the entire loan length. A fixed rate mortgage might have a higher interest rate than other available mortgages. Unlike most other home loans, you know that rate will stay constant over the life of the loan. As with most other mortgage types, your monthly payment will have two parts. Each month, part of the payment goes toward the principal or original loan amount. The other part of the payment pays off part of the interest owed on the loan.

The other way people pay for real estate is to get what is called an Adjustable Rate Mortgage (ARM). An ARM will have a low rate for several years, usually 5 or 7. After that, the rate often slowly rises.

Many people are afraid to get an ARM. There have been horror stories written about them. The only time an ARM can cause you trouble is if you use it to try to buy more house than you can afford. Since the interest rate is lower at first, you might be tempted to buy a bigger house than you could afford with a fixed-rate mortgage. Unless you know you will make more money in the near future, this is a very bad idea. Never buy a house with an ARM that you could not afford any other way.

Using a loan with an adjustable rate to buy a house makes sense when you know you cannot live there forever. If a move is certain before the rate rises, you can get a good deal. You will pay less money for the same house than you would with an interest rate that was high and constant. An adjustable rate loan is also a good option if you know your income will rise by the time the rate rises. For example, if you are married and your spouse will soon graduate and begin working, you know your income is going to grow.

Choosing amongst the various mortgages has little to do with how much real estate you want. It has more to do with how long you plan to live there and what your income will be like while living there. Fixed-rate loans are long and steady. ARM loans are cheaper at first and can vary. The right one for you depends on which one fits your lifestyle.

Author Bio: With years of experience in mortgages, mortgage brokers Ajax find the best rates available for our clients in a stress-free and timely matter. Visit Mortgages Ajax today for a quote.

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