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Austin Real Estate Brokers Types of Mortgages




1. Fixed Rate Mortgages
Fixed Rate Mortgages have a stated interest rate that does not change over the life of the loan, which means your monthly mortgage expense can be easily anticipated for the next 30 years or however long you keep your loan. If you believe interest rates are going to increase, this may be the best option for you.


2. Adjustable Rate Mortgages (ARM's)
Adjustable Rate Mortgages (ARM's) are linked to an index and change as the index rate changes. Many mortgages, such as a 5-Year Fixed ARM, start as a fixed rate loan and then convert to an adjustable rate after a certain number of years. Adjustable rate loans have more risk due to the possibility that the interest rate could increase. However, because you are assuming some of the risk, the lender will generally reward you with a lower interest rate. These loans are of particular benefit to borrowers that plan to either sell the property or refinance before reaching the adjustable period. If you know you will not be in a particular home for more than a few years, we recommend you considering an adjustable rate mortgage.

3. Interest Only Mortgages
Interest Only Mortgages are a good means of either increasing your home purchasing power or maximizing your flexibility to control cash flow. You can save significant amounts of cash for investment, savings, or other expenditures during the first ten years of your loan. If you have a high amount of credit card or other consumer debt, it may make sense to pay down the higher interest rate debt first and then start working on your house. With these loans, the minimum payment required covers interest only. You decide how much or how little of the principal to repay each month.

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