Types of Mortgages

If you've been doing your homework on your mortgage, you probably already know the ins and outs of the different types available to you. Generally speaking, all mortgages are basically loans that are secured by the house. Should you stop making payments on the mortgage, your lender can take ownership of the home. The amount of time you have to pay back your mortgage depends on the type and your specific terms, but it's usually between 15 and 30 years. If you aren't exactly sure about the different types and the advantages that each provides, be sure to read up about them here. We at Advanced Mortgage Group are committed to bring our visitors low cost mortgages everyday. Visit our renting vs. buying mortgages page for more information.

Fixed Rate Mortgage:

Fixed rate mortgages carry an interest rate that will stay the same throughout the life of the mortgage. The good news is your interest rate will never go up; the bad news is most lenders require a higher interest rate from the start to accommodate for it. Fixed rate mortgages are widely considered to be the safest mortgages since you won't see a rate hike, which also makes them more difficult to get as you'll need a good credit score for approval. In general, this is the mortgage that most people want.

Adjustable Rate Mortgage:

Adjustable Rate Mortgages, referred to as ARM's, have fixed interest rates initially, but usually go up over time based on the index and market value. The initial interest rate is usually the same for about the first five years. It then enters an adjustment period and the rate often increases. Since ARM's usually have lower interest rates at first, they attract many first time home owners who aren't aware their rates will increase. However, most ARM's have an interest rate cap or can be refinanced to avoid too high of an interest rate.

Balloon Mortgages:

Like Adjustable Rate Mortgages, Balloon Mortgages have a fixed rate for a period of time, but instead of the rate increasing, the entire balance of the loan is due back. Balloon mortgages are fairly short term compared to the other types, typically lasting 5-10 years. In most cases, you wouldn't take out a balloon mortgage unless you knew you would be able to pay the loan off several years later, which most people simply cannot do.