My First Mortgage - Home Mortgage

Home Mortgage- A Monster Made Easy

What Is My Best Choice For A Home Mortgage?

When considering your first home mortgage , one of the most important questions to ask is how long am I planning to live here? This may seem to be a strange question at first, shouldn't a mortgage be the same no matter the time? You have your principal, and the interest, 20 years, 30 years...thats it, right? Not even close. There is a home mortgage designed with your specific life plans in consideration, and My First Mortgage will help you locate the home mortgage loans that match your demands.

The Fixed Rate Mortgage

A fixed rate home mortgage is just what it says, a mortgage paid off with a fixed rate of interest. The mortgage rates may differ depending on your financial background, but whatever the quoted rate, it will remain constant throughout your mortgage term. A fixed rate home mortgage is ideal for first time home buyers with plans of remaining in the home for many years, 20 or 30, or even longer. Fixed rate mortgages are a good choice because:

you are always aware of the costs for the duration of your mortgage term
you will not run the risks of fluctuating mortgage rates in an inherently unstable marketplace
the approval rates for fixed rate home mortgages are comparatively higher than for adjustable rate mortgages

A fixed-rate home mortgage might be just what you're looking for: stability, continuity, predictability. For the more flexible buyer, there are also...

Adjustable-Rate Mortgages (ARMs)

The important thing to remember with an adjustable-rate home mortgage is the interest you pay is dependent on outside sources entirely beyond your - or your lender's - control. These outside sources are one of many financial indices that reflect the state of national finance and markets, such as treasury notes and LIBOR. With adjustable-rate mortgages:

you are guaranteed lower interest rates for the first years of your mortgage term than in fixed rate mortgages
you are eligible for greater loan amounts with that decreased initial interest rate, allowing you more money for a potentially better home
like the stock market, you have the opportunity of benefitting from a favorable financial environment

That being said, with an adjustable-rate home mortgage you could repay your loan at a decreased interest rate, or you could pay more. Its up to chance, but the good side is there are safeguards to how high the interest rate on your home mortgage could potentially climb, called mortgage caps. It is easy to prepare yourself for a potential increase by simply assuming the highest cap-value and planning on that. Then its bonus time whenever the rates are low, which could be for the duration of your term. An ARM definitely poses risk, but the benefits may outweigh that risk. With a low initial interest rate, an ARM is ideal if you are planning on living in your home for only a few years before selling. You can rely on the low introductory interest rates, then sell and pay off the principal.

Home Mortgage Terms-Pay Now Or Pay Later

Deciding upon a term length to repay your home loans is just as important a decision as fixed or adjustable rate. Mortgage loans are usually repaid over a 30-year term. There are also 20-year terms, 15, 10, or even lower. Its really up to you, but you must take into account both your immediate and long term financial goals. Generally speaking, the longer the term, the lower the monthly payment. Conversely, the shorter the term the less interest accumulates and the quicker your equity increases. For example, if your fixed interest rate on a $100,000 loan is an industry acceptable 6.0%:

For a 15-year term your monthly payment for principle and interest: $844
Total paid over 15 years in P&I: $151,894
Total interest paid on loan: $51,894
For a 30-year term your monthly payment for principle and interest: $598
Total paid over 30 years in P&I: $2215,838
Total interest paid on loan: $115,838

For the 30-year term, you'd pay much less per month, but in the end you will pay $63,944 extra in interest than the 15-year term, nearly two-thirds as much as the loan itself! Be careful when choosing a mortgage term, and know the benefits of low home mortgage rates versus lower monthly payments. Know your financial situation, use our mortgage calculator, and don't find yourself in a situation you cannot financially handle or should not be financially forced into. It is not necessary! Use the information given to you by the experienced people here at My First Mortgage and elsewhere on the Internet and know your mortgage options.