When you go shopping for a house there are many important decisions to make. Not only do you have to find that perfect house that you want to live in for years and years, but you have big decisions to make at your financial institution as well. Before you go to your lender, arm yourself with knowledge about mortgages and the different types that you will be offered so you can make a thoroughly informed decision when choosing a mortgage.
There are generally two types of mortgages - a fixed rate mortgage and an adjustable rate mortgage, or ARM mortgage. A fixed rate mortgage offers one interest rate for the entire life of the loan, while an adjustable rate mortgage offers changing interest rates at intervals of time.
By arming yourself with knowledge before you head to the lenders, you can ensure that you are going to get the product you need at the price you can afford. There are advantages and disadvantages of adjustable rate mortgages that need to be weighed before deciding for, or against, an ARM mortgage.
Adjustable rate mortgages usually come with a significantly lower interest rate than is offered on a fixed rate mortgage. For this reason, ARM mortgages are very tempting to home buyers. On the other hand, a fixed rate mortgage offers the security and consistency of payments and interest rate throughout the term of the loan. There are risks involved with an ARM mortgage, such as higher interest rates in years to come.
Is the risk worth it? It is this primary question you need to ask yourself before heading to the lender to secure a home mortgage loan.
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