There are as many types of mortgages to choose from as there are types of houses to buy. Here you'll learn how to choose the mortgage that is right for you -- and what kind of lender to get it from. There's a lot to learn in this chapter, since there are all kinds of ways to finance your home. We'll tell you about fixed-rate and adjustable-rate mortgages, as well as subprime mortgages for those who have credit problems. We also explain the less-well-known kinds -- jumbo, balloon and others. Finally, we discuss the different types of lends and tell you which ones are the best choices in different financial situations.
What you can expect to learn from this chapter:
Fixed-rate mortgagesExample Say you have a $150,000 mortgage. Let's compare how much money you would pay out in interest over 30 years vs. 15 years. The following chart shows the numbers. The monthly loan payments are principal and interest only. As you can see, with a 15-year loan, you would save $117,001 in interest. | Interest cost: 30-year vs. 15 year mortgages | |
|
30 years | 6.64% | $961 | $196,304 | 15 years | 6.10% | $1,274 | $79,304 | $117,001 | | |
Other factors to consider Take the example above: With the 15-year loan, the monthly mortgage payment is $313 more than the 30-year mortgage. You may want to put that money toward another investment. For instance, in a bull-market economy, you can make more money investing that $313 monthly in mutual funds or other investment securities. Keep in mind that there are ways to prepay your mortgage and whittle away at the principal each month, so that the loan is paid off sooner than 30 years. Also, it depends on how long you plan to own the home you are purchasing. If it's less than five years, you may be better off with an adjustable-rate mortgage, or ARM.
|