Some basic information about different types of mortgages and which one might be most suitable for you.

Types of Mortgages:

30 Year fixed
This is generally a mortgage where you can pay off your principle and interest over a 30 year period and have low monthly payments. If you get a 30 year fixed mortgage at a low rate, you probably will not need to refinance your home ever again unless you want to take cash out against the equity that has built up in your home over the years.

15 year fixed
If you can afford higher monthly payments and would like to pay your mortgage off sooner than 30 years, this would be a good option for you. The rates for a 15 year mortgage are generally a little bit lower than a 30 year fixed so you experience more savings over the life of the loan. Also, you are eliminating 15 years worth of interest payments which compounds your savings over the life of the loan even more.

ARM's (Adjustable Rate Mortgages)
Adjustable Rate Mortgages generally start off at a very low fixed rate for a 2, 3, or 5 year period, then turn into adjustable rate mortgages after the fixed period is over. The minimum payment required is only the interest, not the principle thereby making your monthly mortgage payments substancially lower than if it were on a 30 year fixed program (priniciple and interest).

Types of ARM's:

• Interest Only: You can pay your low interest only payment during the fixed period. Whatever you pay beyond the interest payment goes towards your principal. This type of program is good if:
  • You don't plan on staying in the home longer than the fixed period.
  • You expect to be earning a higher income in the future.
  • You are willing to refinance your home again at the end of the fixed period.

• Negative Amortized ("Neg-Am") mortgages are similar to interest only except that you have the option to pay a lower, interest deferred payment. This places the interest that you are not paying now onto your loan balance for future payment. Programs associated with this type of mortgage are called "Pick a Payment". You have the choice of paying:
• deferred interest, the lowest payment option,
• interest only, which is a little bit higher but you are not accumulating interest onto your loan balance
• A standard loan amortized over 30 years inlcuding principle and interest. (A higher payment then interest only) Or,
• A standard loan amortized over 15 years including principle and interest. (This would be the highest payment option, if you can afford it)

This type of program is good if:

• You are self employed. The times when your business is slow, you can choose the deferred interest option until your business picks back up again.
• Your job is seasonal. Teachers, for example who may have a lower income during the summer months can use the lower payment option during these lower income months.
• You don't plan on staying in the home longer than the fixed period.
• You expect to be earning a higher income in the future.
• You are willing to refinance your home again at the end of the fixed period.

The main benefits of this type of program:

• Allows more cash flow while your home is building equity.
• Flexibility in paying your mortgage.
• Extremely low interest rates.
• The ability to purchase a more expensive home than what you could afford with a conventional 30 year fixed interest loan.