Deciding on a Mortgage
A mortgage on your house or property is a very huge financial commitment. This is not something you rush into or decide rashly, because the consequences of failure are too drastic. So do your homework and take time to study your options before committing yourself to a lifelong decision.
There are a number of mortgage options to choose from depending on your status. But mortgages can last for 20 years or more, before they mature. It is therefore important that you are aware of the implications of the mortgage agreement you will be entering into with the bank. You can get a good idea of what type is best for you if you look into some of the advantages and disadvantages of each type of mortgage agreement.
I have listed them below to help you make a choice.
First and foremost, you need to determine what your financial needs are, why you are applying for a mortgage. It is helpful to answer this first so you know what type of agreement is ideal for your situation.
1) Will a fixed rate or adjustable rate mortgage be best for you? Would the same interest rate for the entire duration of the mortgage be best for you? If you prefer the adjustable rate mortgage, you will be experiencing fluctuations in interest rates per month, but this has a cap so it won’t go too high. What suits you best, paying the same amount of money each month; or venturing on the possibility of lower interest rates because of adjustments?
But fixed rate mortgages are the most popular type of mortgage. Fixed rate mortgage is ideal for people who plan to stay forever in the property; while adjustable rate mortgage is ideal for those who plan on moving.
2) Will a government insured or conventional mortgage be best for you? After deciding on what interest rate is ideal for your situation, you need to determine whether a government insured loan or a conventional one will suit you. The advantage of a government insured loan is that you have a guaranteed backing from the government; while in conventional loans there is none.
3) The two types according to size are: Conforming or jumbo loan. Finally, you need to decide what type of loan will best answer your financial need – a conforming loan or a jumbo loan? How much money do you want to borrow, is it just a small amount or a very large amount? For smaller amounts of money, conforming loans would be ideal; but for larger amounts, you need to apply for a jumbo loan.
The best way to guarantee your peace of mind in the future is to research your options carefully before mortgaging your home or your property.