Choosing the Right Loan Type Depends on Your Needs

by Joe Taylor Jr.
CMR Columnist

Depending on your situation, mortgage lenders will offer you a variety of home loan options. 30-year fixed rate mortgages, 20- and 15-year fixed rate home loans, adjustable rate mortgages, and HELOCs all have there own advantages and disadvantages that you should examine when choosing a home loan.

Traditional 30-Year Fixed Rate Home Loans: Lock in the Lowest Rates

Most homeowners end up paying more than the value of their home in interest over the course of a thirty-year mortgage. However, locking in a low, fixed rate lets you enjoy a stable monthly payment. Over time, your fixed-rate payment usually requires a smaller percentage of your income every month.

20-Year Fixed-Rate Home Loans and 15-Year Fixed-Rate Home Loans: Save Time and Money

If you enjoy a strong income, consider a shorter term, fixed rate mortgage. You'll make a slightly higher mortgage payment every month, but you'll slash a significant amount of interest from your loan.

Adjustable-Rate Home Loans: Get Flexibility

Whether you move around the country because of your job or you only expect to spend a few more years in your home, an adjustable-rate loan can keep your monthly payment low. Keep in mind that fluctuating interest rates could cost you lots of money in the long term. Therefore, use an ARM only when you can tolerate risk.

HELOCs: Invest in your Home

A home equity line of credit can help you invest in repairs and renovations that increase the value of your home. Whether you plan on selling your home, or you simply want to enjoy a higher quality of life, a HELOC can provide a short-term cash solution.

Experienced mortgage underwriters can help you run the numbers to make your choice even easier.

Sources
"Choosing the Best Mortgage"
"Procedures in Selecting the Best Home Loan"
Clark Howard Mortgage

About the Author
Joe Taylor Jr. has covered business and finance news for Financial Times Television and CNBC. He coaches beginning mortgage brokers to provide better customer service and understand creative financing opportunities.

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