A mortgage is a loan that a person takes out in the process of buying a home. A mortgage loan can have a fixed rate, an adjustable rate, or a combination of the two. A fixed rate mortgage loan means that the rate is the same for the entire term of the mortgage loan.
An adjustable rate mortgage means that the rate could change over the life of the loan, causing the payment to change. Fixed rate mortgage loans typically have terms of 15, 20, and 30 years. Adjustable rate mortgage loans typically have terms of 30 years, but only a part of that term is fixed, say perhaps, 2, 3, or 5 years.
A mortgage loan can be used by anyone buying or refinancing:
The first step in the mortgage loan process is to determine how long you intend to keep your property. Mortgage loans with initial fixed interest periods (2/1 ARM, 3/1 ARM, etc.) typically carry lower rates than 30 year fixed mortgage loans, giving a lower payment to someone planning to own a property for a shorter period of time.
There are many benefits to having a mortgage loan. Having a mortgage loan means you own a home, and can build equity. Equity simply means the difference between the value of a property, and the amount you owe on the mortgage loan.
The interest on a mortgage loan is often tax deductible, saving you money. Having the ability to take out a second mortgage loan on your property gives you access to your equity. As mortgage rates change, you can refinance your mortgage loan to get a better rate.
Always read and understand the documents associated with your mortgage loan while going through the process. Have either an attorney or other trusted advisor with you, if needed, when signing mortgage loan documents.
Option ARMs, and specialty mortgage loans are best suited for borrowers that know how to use them. An example of this is someone owning an investment property that they absolutely know they will be selling in a few months. Always compare mortgage loan fees between lenders when shopping for a mortgage loan.
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