Home Loans-Your Options

If you are considering the purchase of a home it is important to know there are many different types of home loans available. These loans include adjustable rate mortgages (ARMs), fixed interest rate home loans and combinations of the two. Deciding between these different types of home loans is one of the most important decisions you will make as a potential homeowner.

Fixed Interest Home Loans-A Traditional Choice

A fixed interest rate involves an interest rate that does not change. A specific interest rate is obtained at the beginning of the loan and remains the same throughout the life of the loan. The homeowner can opt to achieve a more favorable interest rate; however, he or she will need to refinance in order to do this. This type of home loan is a good choice if the homeowner is able to obtain a good interest rate and anticipates staying in the home for a long period of time.

Adjustable Rate Mortgages-An Alternative Choice

With an ARM the interest rate will vary according to an index that is predetermined. This type of loan is slightly more risky due to the fact that interest rates could rise at any time during the period of the loan. There is some protection generally afforded to homeowners through a limited rate change. With this type of cap, for example, the interest rate on the

Hybrid Home Loans-A Modern Option

There are many types of home loans that combine the idea of adjustable rate mortgages and fixed rate mortgages. With this type of loan there is typically a time period in which the interest rate is fixed. After that time period the interest rate on the loan would then become adjustable. This type of home loan is generally beneficial for homeowners who are able to obtain a favorable fixed interest rate at the beginning of the loan and who believe they will sell their home before that fixed rate time period ends.