Buying your first home is an exciting time for anyone in Florida. Those who have saved up a down payment may be on the lookout for the perfect home. However, what many will find is that they also need to seek out the perfect mortgage to finance that home.
When it comes to mortgages, some have a "fixed" rate, while others have an "adjustable" rate. It is important to understand the difference between these two categories, so that you can make an educated decision when choosing a mortgage.
In a fixed-rate mortgage, the mortgage's interest rate will remain the same throughout the course of the loan. This means the homeowner will pay the same amount each month until the mortgage is paid off, whether this takes 15 years or 30 years. One positive aspect of a fixed-rate mortgage is that homeowners will know exactly what they will be paying each month throughout the entire course of the loan, so there are no surprises. However, interest rates on fixed-rate mortgages are sometimes higher than those in adjustable-rate mortgages.
In an adjustable-rate mortgage, the interest rate on the loan may fluctuate over time. In general, the interest rate will remain the same for a certain amount of time, and, following that, it will change annually until the mortgage is paid off. When this happens, the mortgage is considered a "hybrid" loan. One positive of an adjustable-rate mortgage is that the initial interest rate is often lower than it would be in a fixed-rate mortgage. However, the uncertainty of future interest rates could be an issue for some homebuyers.
In the end, homebuyers need to carefully consider their finances before deciding on a mortgage. Because mortgages can be very complicated, it can sometimes help to have an attorney review it before you sign on the dotted line.
Source: HBI, "The Different Types of Mortgage Loans in 2017, Explained," Accessed Aug. 14, 2017