Different types of mortgages

The different types of mortgages, with different types of loan rates, appeal to many demographics with their own set of needs and financial concerns. Discussed below are some of the mortgage choices you have:

Fixed rate mortgage: This type of mortgage offers a mortgage loan rate where the interest rate will never change over the life of the loan. The 30-year loan is the easiest to qualify for, and you get a bigger tax deduction than with a shorter mortgage. You can get a lower mortgage loan rate with a 20-year mortgage, although not many banks or lenders offer them. Obviously, with a 15-year mortgage, you will pay more in monthly payments, but you can get a lower interest rate, plus the payoff will be quicker

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Variable rate mortgage: With an Variable rate mortgage, there is an initial period where the interest period does not change. After that, you can pretty much negotiate with the lender how often you want the rate to change. When lenders come up with their interest rates for Variable rate mortgages, they look at federal or international monetary indexes and add between two and four percentage points. Obviously, when the indexes go up, so do interest rates, and vice versa.

How interest and mortgage loan rates are calculated

The annual percentage rate (APR) of a loan allows you to calculate the differences between mortgage offers from lenders. The APR is the annual finance charge, which includes fees and other loan costs, divided by the amount borrowed. The APR will be slightly higher than the interest rate the lender is offering because the APR includes all fees and processing costs. But you have to make sure you know what fees are included in the APR calculation. There are fees included in any APR (such as origination fees, application fees, and underwriting fees), and then there are fees some lenders add on to cover their own expenses (such as title insurance or appraisals).

As with any major financial decision, it is important to shop around first and use our experience to get the best deals

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