There are different types of home mortgage loan, however most of them fall under two categories: fixed rate and adjustable rate. To go either fixed or adjustable rate home mortgage is just a matter of how you personally want it to be. However, to make a wise decision, you must try to have a good grasp of the difference between these two types of loans. We will discuss the advantages as well as disadvantages of fixed rate and adjustable rate type of loans.
Fixed Rate Loans: Advantages
Remember that fixed rate loans have interest rates that remain the same even with major changes in the economic situation. And even if the interest rates increase, your mortgage will not change. Fixed-rate home mortgage loan is ideal for a borrower who needs to know how much his loan payments will be every year. This makes him assured that he know how much his financial obligations are in the long run and allows him to be ready for payments. The fixed rate type of loan is the best choice for someone who hates taking financial risks. Likewise, with fixed rate loans, this allows you to remain in you property for a long period of time.
Fixed Rate Loans: Disadvantages
One disadvantage of fixed rate loan is that if the interest rate significantly decreases during the period of the mortgage loan, then the borrower will be on a serious disadvantage financially. One way for the borrower to counter such negative effect is to go through mortgage refinance and get a much lower interest rate. It may actually become a financial burden especially if the person is experiencing serious debt problems or if the value of the house has markedly decreased. The total cost of fixed rate loan is likely to be higher than that of an adjustable rate loan in the event of a decrease in interest rates.
Adjustable Rate Loans: Advantages
Adjustable rate home loan on the other hand is ideal of those who are not afraid to take risks. Adjustable rate loans fluctuate with whatever situation the economy is at the moment. And if rates drop, this is to the advantage of the borrower, as significant amount of savings can be earned. Risk takers who are contemplating on getting a home mortgage loan decide on getting adjustable rate type especially if they believe that the current interest rate is going down. Likewise, adjustable rate loans are great for those who do not intend to stay long in their property.
Adjustable Rate Loans: Disadvantages
A disadvantage of adjustable-rate home mortgage loan is the ever present danger of the interest rate of going up without any increase in the borrower’s income or other financial source to counter its negative effects. Therefore, it is ideal that a rate cap is place when going for adjustable type of loan in order to you to make sure you are still able to conveniently maintain your loan.
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Does a mortgage loan have to be a minimum amount when purchasing a house?I'm looking for a house in the Ft Wayne IN area, probably in the less than $20,000 range. I am a first-time home buyer. Is it possible to get a mortgage for an amount this low, assuming the property is of course assessed for at least the amount of the loan? Why kind of down payment and closing costs should I expect to pay? Thanks for any help!
Ultimately, you are always responsible for property taxes or assessments. So if the county has a website, it is best to find out previous taxes on that specific property, or whether they have a way to "estimate" based on value (since Proposition 13 or tax on an empty lot before new construction might make previous taxes artificially low).
And it is best to check the county site to track if your lender is properly paying your property taxes from escrow on time.
I had problems with my lender neglecting to pay taxes on my double lot the year purchased (2002), which I suddenly had to pay myself directly after receiving notice of tax sale. Then my lender misunderstood, thinking they had paid the wrong bill (when they should have paid both), and sent me too much back from escrow. The following year when it finally sank in that they had to pay both lots, they bumped up my escrow payments to catch up. But I knew that would come eventually, so I was prepared for the escrow increase.
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