How to Find out What Type of Mortgage Loan Is Right for You

Buying a home can be a stressful process, especially when you're confronted with the prospect of spending decades paying back a mortgage. Fortunately, choosing the type of mortgage that's best for your needs is pretty straightforward in most cases.

Fixed-Rate Mortgages

Fixed-rate mortgages are usually considered the “standard” mortgage, requiring payments at a fixed (unchanging) interest rate. A 30-year mortgage is recommended in most cases, but if you think you may move again before 30 years are up, a 15-year mortgage may be a better choice.

The length of the mortgage determines your monthly payments since paying off a mortgage in 15 years requires higher monthly payments than doing it in 30. A fixed-rate mortgage usually offers the lowest total cost of the loan and the lowest interest rates.

Adjustable-Rate Mortgages

Adjustable-rate mortgages (ARMs) offer an interest rate that changes over the lifetime of the mortgage. Such rates are usually expressed as “3/1” or “5/1,” where the first digit is the number of years you’ll pay at a specified interest rate, and the second digit denotes how often the rate will be adjusted afterward. So, a 3/1 ARM provides a fixed rate for the first three years of your mortgage and then adjusts the rate based on market conditions every year afterward.

It's possible for monthly payments to decrease after an adjustment, but more commonly they'll rise or stay the same. ARMs can be a good choice if you want to pay less at the start of a mortgage but know for sure your income will increase over time, but you need to be certain that you can keep up with rate changes.

Mortgage Variations

These types of mortgages offer variations to standard fixed loans or ARMs.

• Interest only: You pay only interest for a specified term, then start paying down the balance — a good fit if you know your income will increase in the near future.

• Payment option: Each month you choose between several different payment amounts, usually interest-only, interest plus reduced principle, or full payment — a good fit if your income is inconsistent.

• Balloon: You make reduced payments on a short-term mortgage, then pay the remainder in one lump sum at the end — a good fit if you know you’ll be selling the home by the time the balloon payment is due.

The Mortgage Process

While negotiating and closing a mortgage agreement, you'll work extensively with a realtor, your mortgage provider and other parties in a process that is guaranteed to generate a mountain of paperwork. Fortunately, myMailHouse makes it easy to manage all your mailing needs, from certified mortgage letters to bulk mailing and more.

Contact us today to learn more.