Buying a home upfront requires a substantial capital investment. The best solution for most individuals yearning for home ownership is a mortgage. Fixed-rate mortgages have predictability, making it easy to plan a budget around your monthly payments.
A mortgage company will offer various fixed-rate residential home loans. Though the interest rates on these loans remain fixed, your monthly payments might increase with a rise in mortgage insurance, real estate tax, or home insurance. Here are the different options for fixed-rate mortgages:
This type of mortgage maintains a similar interest rate for the first five years of the loan. After this time, the loan changes to an adjustable one. The main benefit of this loan is the low-interest rate in its initial years. However, after the five years, your interest rates might rapidly increase depending on the current rate market index.
This loan is quite attractive since it comes with lower interest rates. It allows the homeowner to build equity at a fast pace. This is because the credit has higher monthly payments compared to a 30-year loan.
This is the least costly home loan. Though the credit typically has higher interest rates than 15-year mortgages, the monthly payment is low since it is spread out over thirty years. It is the best option for low-income families since it allows them to purchase seemingly expensive homes at low monthly costs.
15-year and 30-year home loans are the most common types of fixed-rate loans. Be wary of a no-cost loan option when signing for a fixed-rate loan. This means that the closing costs of your investment are rolled into your mortgage. Though it might look like a lucrative deal upfront, you will be paying interest on these closing costs over the life of your loan.