Are you a first time home buyer?
Deciding to buy a home is one of the most exciting and challenging undertakings in life. But as a first time home buyer, it can be difficult to make sense of all the jargon when researching mortgages.
Here are the types of mortgages you can look into as a first-time buyer.
Fixed-Rate Mortgages
This type of mortgage offers a fixed interest rate over the entire duration of the loan when looking for houses for sale. This makes it easier to budget and plan ahead. It is secured against the value of the property. This means that you pay back the loan over a fixed timeframe plus interest, regardless of changes to the interest rate.
It is also a good option if you intend to stay in the house for a long period and would benefit from the stability of the monthly payment. You will have certainty as your monthly payments remain constant throughout the duration of mortgage loans.
Adjustable-Rate Mortgages
Adjustable Rate Mortgages (ARMs) are popular solutions for first-time buyers. This is because they typically have lower introductory interest rates than fixed-rate mortgages. The interest rate is generally fixed for a certain period of time. It is usually one to five years before it can fluctuate with the market.
During that period, the borrower’s monthly payments remain fixed. After the initial period, the monthly mortgage payment adjusts to changes in the market, but usually not more than two to three times a year. ARMs also provide more financial protection as a safeguard against times of economic difficulty.
Conventional Mortgages
These types of mortgages typically require a down payment of 20% of the purchase price, and can be fixed or adjustable rate. Fixed rate mortgages provide a set interest rate that remains constant over the life of the loan, making them easier to budget.
Conventional loans come with reasonable interest rates, minimal paperwork and no special requirements, making them great for first time home buyers who may not have the credit score or the down payment necessary for costly loan programs.
Reverse Mortgage
These funds can then be used to pay for their mortgage payments, allowing homebuyers to enjoy the benefits of home ownership even if they don’t have access to traditional financing options.
They are also advantageous for those who are interested in using the proceeds for home improvements or other expenses. Reverse mortgages are not without risks and should be thoroughly discussed with a financial professional before embarking on this financial journey.
Lend Back Mortgage
This form of loan provides a unique advantage to the borrower, as the loan will be approved with no down payment or private mortgage insurance. The lender will agree to a specified amount but will usually require the borrower to pay back part of the loan amount eventually.
This repayment requirement provides a way to reduce the interest rate burden and helps the borrower to become comfortable owning a home without paying a large sum of money up front.
Explore The Different Types of Mortgages
In conclusion, when buying house for the first time, it is important to understand what types of mortgages are available, the benefits of each and potential drawbacks.
It is also beneficial to speak to a mortgage expert who can make a mortgage suitable for you and your finances. If you’re ready to explore the options available to you, why not contact a mortgage broker to get started.
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