When you need to buy a home but don’t have enough saved up for the down payment, it can be tempting to just go into debt and take out a mortgage loan. But before you sign that dotted line, you should make sure you know everything there is to know about these loans and how they work. That’s why we put together this post all about them! It will tell you everything from what mortgages are, what types of mortgages exist, how much your monthly payments will be based on the size of your loan amount and interest rate, as well as what happens if you want to sell or refinance!
So take a few minutes to read through this post and learn more about mortgages. It will help you decide whether or not you should take one out on your own.
BASICS
A mortgage is a long-term loan that comes with a set monthly payment and is secured by the value of your property (based on the appraised value of your house). If you buy a house, then you have taken out a mortgage. If you’re building one, then it’s not actually a mortgage, but it accomplishes the same thing.
What types of mortgages exist?
There are many different kinds of mortgages that you can take out, each with their own unique benefits. Among them are:
- Cash-out refinancing : This type of mortgage lets you pay off a portion or even all of your existing mortgage debt and then refinance it into a new mortgage loan, with the money now serving as your down payment. You can now buy a house with much less to put down (or none at all) than if you just used cash – see our post : This type of mortgage lets you pay off a portion or even all of your existing mortgage debt and then refinance it into a new mortgage loan, with the money now serving as your down payment. You can now buy a house with much less to put down (or none at all) than if you just used cash – see our post How Much House Can You Afford With 0 Down and No Money Down
- Adjustable-rate mortgages ( ARMs ): These are like fixed-rate mortgages, except you have to pay interest rates that change frequently. These types of mortgages are very popular, so you'll see them on most lenders' websites. What makes them different from fixed-rate mortgages is the way they adjust their interest rates over time. The rate may go up before it goes down. Read More
