By the time you finish paying off the mortgage on your home, you'll have paid more in interest alone than the actual purchase price of the house. There are many mortgage products on the market now, so it's important for you to do your homework to determine which type is best for you, and which bank, savings and loan, mortgage bank, finance company or credit union offers the best terms for that type of loan. The internet makes this process easier. You can find out how large a loan you qualify for, compare loans, search for the lowest rates in your area, and in some cases, apply online. If you want predictable payments over the life of your loan and don't mind paying a bit more for this assurance, the fixed rate mortgage may be the best option for you.
Increases are usually capped for any given year and for the life of the loan.
For example, a typical ARM might include an annual cap of 2 percentage points and a cap over the life of the loan of 6 percentage points. These loans are popular with people who expect rising income over the next few years because they can buy more house on a lower current income, confident that their increasing income will make the higher payments affordable if the interest rates rise in subsequent years. If you know you'll be moving in five to seven years, and you'd like a lower interest rate but are uncomfortable with an adjustable rate, the balloon mortgage may be for you. These loans often have a somewhat lower interest rate than a conventional 30-year mortgage, but the loan is due in five to seven years. If you're still in the house at the end of the term, you'll have to find another mortgage in order to pay off the first one.