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Pick the Right Mortgage for Your Next Home

Pick the Right Mortgage for Your Next Home

how to choose the right mortgage

Buying a home this winter can offer less competition and sellers that are more willing to negotiate. Before starting your house hunt, it’s important to understand what types of mortgage loans are available. It’s a good idea to be pre-approved for a mortgage before looking at houses. This gives you a good idea of what homes fall within your budget. Since 2008, lenders have stuck to more safe and sensible home financing. It’s important to be familiar with the options typically available. The following are a few of the primary types of mortgage loans available:


A fixed-interest mortgage is probably the simplest home loan that one can get. Basically, the interest rate remains the same for the duration of the loan’s lifetime, and buyers will pay equal payments every month of that loan’s lifetime. However, it’s important to realize that the interest payments are front-loaded. This means that for the first couple of years of the loan term, only a small part of the payments will actually be paying off the principal of the loan. Most fixed-interest mortgages are taken as 30-year loans although they can be made shorter in duration, such as 10, 15, or 20 year-loans. The 30-year fixed-interest loans tend to be more popular among homeowners because they allow for the lowest monthly payments.


The interest rate on an adjustable-rate mortgage can change every year. Homeowners can also choose a hybrid adjustable-rate mortgage. This means that part of the duration of their loan can be set at a fixed-interest. For example, the first three years can be set at a fixed-interest rate. Once the three years are up, the loan will become an adjustable-rate mortgage for the rest of the loan’s life. One-year adjustable-rate mortgages are available as well, although most home buyers elect not to go with them. The only time a one-year adjustable-rate mortgage might be a good idea is if the fixed-rate mortgages are particularly high.

Interest-only loan

Interest-only loans are good options if you’re looking to pay as little as possible for the first few years. An interest-only loan lets these buyers pay only the interest for the first few years of the loan’s life. Interest-only loans are structured in a similar manner to adjustable-rate mortgages. For example, a 5-year fixed 30-year loan will require only fixed interest payments for the first five years. Interest-only payments are just an option! Buyers can begin paying off their principal if they wish.

These are three of the more common types of mortgage loans that buyers can choose.

When you’ve considered the loan that is right for you and are ready to look for homes, start your search here.