Which Type of Mortgage Loan Would You Choose to Buy Your Home?

If you have decided to buy a home to retire to, it is time to act fast and get your mortgage. But wait! Things have changed significantly since the time you may have walked into a bank and gotten a mortgage for your first home. Did you know there are several types of mortgages? Which one will you choose when buying your home? Having a basic understanding of these mortgages will help you choose the most suitable. Below are three popular mortgages that can be considered when purchasing a 55 Plus senior home for retired living.

Fixed-Rate Mortgage

As you are aware, a mortgage requires you to pay a certain amount of money to the bank or any other lending institution monthly. The amount you pay depends on your mortgage and the interest rate at the time of borrowing. The most common type of mortgage, which many potential home buyers go for, is the fixed-rate mortgage. This is a fixed amount of money which you will have to pay monthly. This method is extremely popular as all homeowners can budget their monthly spending as the payments do not vary. The fixed-rate mortgage enables you to calculate how long it will take to pay off the loan and interest. This type of loan is extremely beneficial as mortgages are paid within a 30- or 15-year period. You should consider a fixed-rate mortgage only if interest rates are low and you can afford the monthly payments.

VA Loans

This loan is for members of the military who wish to be homeowners. Right now, it is the most powerful lending option available as the Department of Veterans Affairs pledges to repay a quarter of the loan if a borrower defaults. This enables VA-approved lenders the ability to lend to military borrowers without any reservations. This is one of the reasons VA loans have highly competitive rates. The best thing about the VA loan is that veterans can obtain a loan without any down payment. They are also less stringent than conventional loans and do not have private mortgage insurance which you have to pay unless you pay 20% of the loan amount. The interest rates on VA loans are lower than conventional loans and there are no prepayment penalties. If you were a military member, this is your ideal choice.

Adjustable-Rate Mortgage Loans

An ARM is a mortgage with its interest rates linked to an economic index. The changes in the index are the deciding factor on your monthly payments. This means the interest rate fluctuates every month, semi-annually, or annually or it can remain the same depending on the index. The main reason to consider ARM is the lower monthly payments. However, you are still at risk of higher payments if the index rises. However, if you are interested in an ARM, you can limit the interest charged by using a rate cap.

There are many other mortgage types you can consider when purchasing your loan. Making sure to know all these mortgages and their advantages and disadvantages can be extremely beneficial. Keep in mind that this is not something you should rush into. Weigh your pros and cons carefully and consider your options before walking into your bank.

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