Choose the best option for you, among these 4 types of mortgages, which one would you choose and why ?

Choose the best option for you, among these 4 types of mortgages

For most of us, owning our own home is an integral part of what we call the "American Dream"! However, for many, it requires obtaining a mortgage in order to afford such a purchase. After more than 15 years as a licensed real estate salesperson in New York State, I usually take the opportunity to discuss some options with potential clients/buyers early in the process! Basically, there are at least four types of mortgages that are often available depending on individual needs, qualifications, finances, comfort zone, etc. With that in mind, this article will attempt to review, examine, review and discuss these mortgages and explain their differences as well as some of their potential advantages and disadvantages.

1. balloon loan:

Sometimes personal circumstances indicate that a balloon loan should be considered. This type of loan is usually for a relatively short term (often 5 to 7 years), requires a very small down payment (not counting fees, etc.) and a somewhat affordable monthly payment. However, at the end of that period, the borrower must either refinance, pay off the balance, or sell their home! So you're probably aware of both the benefits (short term) and the potential long term considerations/consequences!

2. Adjustable:

 Many homeowners use an adjustable term mortgage for a variety of reasons. Often the interest rate, etc. is lower and therefore more affordable than a conventional loan! Because of this, some may qualify for a loan because many loans are based on total monthly payments. However, it must be recognized that these terms and interest rates change from time to time at regular intervals, and depending on this, the total interest expense may increase, sometimes by a significant amount!

3. 15-Year Regular Loan: 

A regular mortgage loan is a loan that has the same monthly payments throughout the life of the loan. The only thing that changes are the payments that are made to escrow for items such as property taxes, insurance, etc. Generally, the shorter the term, the less interest paid, but it also results in higher payments because the repayment period is shorter!

4. 30-Year Conventional Loans:

Conventional mortgages are usually offered for a variety of terms, but 30-year mortgages are the most in demand. Since almost all mortgages no longer have early repayment penalties, those who want to repay the loan in a shorter term increase their monthly payment, but have the option to pay the regular amount when it makes the most sense for them. Obviously, as principal is repaid over a longer period, monthly payments decrease, but often lenders charge slightly lower interest rates for short-term loans.

I will always tell you what you need to know, not just what you want to hear (TM). This trademark, of which I am proud, guides my professional conversations/interactions, helping me make sure my clients are knowledgeable and informed !