First Mortgage Loan
Every person who has ever bought a home with a mortgage knows that by the time the pay off is made on the mortgage more is paid to cover interest costs than the actual purchase price of the house.
For example, on your first mortgage loan, you borrow $125,000 at 8% with a 30-year term. After your first mortgage loan period is done, you’ll have paid over $205,000 in interest and the $125,000 principal amount you borrowed. A result, your house that is only for $125,000 ends up costing you $330,000 on your first mortgage loan.
This is the reason why, it makes absolute sense that before taking on your first mortgage loan, a little bit of shopping is done. Getting the best product for your first mortgage loan is nice and most probably the biggest financial decision you’ll ever have to make.
All right. So let’s get down to the basics. Most people think that a mortgage is a loan. Well, it’s not. A loan is something the lender gives you. A mortgage, on the other hand, is something you give to the lender.
Now when you take on your first mortgage loan, it’s imperative that you know what types of mortgage products are currently being offered in the market. Below are some of these first mortgage loans.
Fixed Rate for your first mortgage loan
If you’re thinking of getting your first mortgage loan, a fixed rate mortgage might be the right choice for you. In a fixed rate mortgage, interest rates are set all throughout the whole loan term. This means that when you take on your first mortgage loan, your interest rate will not increase or decrease. The interest rate of your first mortgage loan will remain the same all throughout the loan period, usually 30, 20, 15, or even 10 years.
Getting a fixed rate first mortgage loan will have you paying for a predetermined monthly payment rate. Payments for your first mortgage loan interest and principal will never change. Having this type of mortgage for your first mortgage loan is especially advantageous if over time, interest rates suddenly go up. Plus, down payment if you get this as your first mortgage loan could be as low as 5% of the original purchasing price.
Adjustable Rate First Mortgage Loan
If the projected interest rates in the market are going down, then an adjustable rate mortgage might just be the right option for getting your first mortgage loan. Adjustable rate mortgages are mortgages where the interest rates and monthly payments depend on the rise and fall of rates in the market. This type of loan is especially a good choice for a first mortgage loan also if you expect a rise in your income over the next few years.
Balloon First Mortgage Loan
If you do not plan on keeping your house for long, then getting a balloon first mortgage loan will do the trick for you. A balloon first mortgage loan offers lower interest rates compared to a conventional loan. The only downside to this type of mortgage for a first mortgage loan is that a large amount is due in five to seven years. If you do not have funds to cover that amount and you are still in the house by the end of the loan term, you might need to get another loan in order to cover the cost for that first mortgage loan.
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