Compare Mortgage Types

One of the most important factors in getting the mortgage rate you want is finding the right mortgage type. There are four basic types of mortgages that lenders offer, adjustable rate mortgages, fixed rate mortgages, bridge mortgages, and balloon mortgages. Each has their own positives and negatives, see which one fits you:

Balloon Mortgages:

Balloon mortgages are typically the shortest lasting of all mortgages types at about 7 years. They start out by having a fixed interest rate, which could possibly increase before the end of the loan term. When the term ends, the entire balance left on the loan must be paid off or the owner faces foreclosure. Because of this, balloon mortgages are only meant for people that can put down a very large down payment or will have a considerable amount of money to pay off the loan when the term ends.

Adjustable Rate Mortgages:

Adjustable rate mortgages or ARM's have an interest rate that will almost certainly change over time. They usually begin with a fairly low interest rate, but after several years the mortgage enters an adjustment period where the rate can increase. Though, most ARM's have a cap or limit as to how high their can increase. Adjustable rate mortgages are very popular because it is easier to get approved for them with bad credit.

Fixed Rate Mortgages:

Fixed rate mortgages are considered the safest option when it comes to home loans, although they also require the best credit rating to get approved for. These mortgages retain the same interest rate throughout the life of the term. There's no risk of the interest rate increasing with fixed rate mortgages, but the initial rate may be higher in order to compensate.

Bridge Mortgages:

When someone attempts to move from their old house to a new house, they often do so through a bridge or swing mortgage. Instead of waiting for their home to be sold, which could take months, they borrow the equity from their old home to put toward the new one. The loan is then typically converted to a fixed or adjustable rate mortgage.

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