Things To Consider When Choosing Mortgages

Submitted by: Barry Dawn

When choosing from among mortgages, you will be excused for having a difficult time at it. After all, the numbers and the fine prints can be so confusing to the uninitiated that you probably will sign on the dotted line for the first one that seems to be the most favorable for you. Well, of course, as any home buyer knows, appearances can be deceiving.

That being the case, you want to do your research and think about your many options before making the final decision. You can start your research by asking the following questions discussed in this article. Keep in mind that each factor in choosing mortgages is interconnected with the others, thus, you must weight your answers collectively and separately.

Length of Stay in the House

Without a doubt, the length of time you spent in the house will determine which of the mortgages you ultimately choose. For one thing, if you plan to use the home in 7 years or less, then an adjustable rate is the best option. If you plan to live in it for the long haul, say, 20-30 years, then a fixed rate is the better choice.

Acceptable Risk

Your level of acceptable risk will also determine the type of mortgage rate you are willing to assume for the long-term. On one hand, if you want to pay fixed amortizations for the whole term of the home loan, then a fixed mortgage is for you. On the other hand, if you are willing to take on the risks of fluctuating interest rates and, hence, monthly amortization, then an adjustable rate is the better option.

Take note, however, that with a fixed rate loan, you will often incur a higher interest rate while an adjustable rate loan will most likely net a lower interest rate. So, balance your options before choosing from among the mortgages.

Expected Income Flow

Well, of course, your expected income flow will affect which mortgage you ultimately choose. After all, you will be paying the monthly amortizations from said income.

Do make sure that your expectations closely mirror the reality. Otherwise, you will be faced with either a short sale or a foreclosure, both of which have great effect on your credit rating. You don’t want it to slip into the “poor” category, in which case you may have to wait for a few more years before thinking of looking at more mortgages.

Available Cash

You will be paying for upfront costs such as the down payment on the house you want to purchase. Look at your available cash since mortgages often come with options on the amount of down payment you can make.

The general rule is that the higher the down payment, the lesser your monthly amortizations will be. Also, do be informed that you will be paying for closing costs so be prepared for them.

These factors must be carefully considered if you want to secure the most favorable home loan contract for you and your family. Remember that this may well be the biggest and most important financial decision you will ever make so be wise about it.

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