Do you have plans to move out of your house soon? Was your
job transferred to another location where you may live for
only five years or less? Or, can you picture your family
staying in one house for 10 or even 20 years? These are
important questions to ask yourself when you consider which
type of house loan fits your needs.
You need to understand the different categories of house
loans before you can select a term, interest rate, or down
payment arrangement. The two top categories are fixed and
adjustable. Fixed house loans start out at a predetermined
interest rate that will not fluctuate throughout the life of
the loan unless you purposely refinance. Adjustable house
loans on the other hand do just that - adjust a set number
of times each year throughout the term of the loan.
The price of a home that you can afford does depend on the
kind of loan you select and the term, or number of years for
repaying the loan, that you select. Most mortgages are
written with a 15, 20 or 30 year term. A longer term means
that the monthly payment is lower but you also pay more
interest because you have borrowed the money for a longer
period of time.
House loans usually require a down payment and most lenders
want at least 5% of the purchase price of the home as the
down payment. When you put more money into the
down payment, your monthly payments will be less.
Lenders like a larger down payment put on a house loan and
will reward you for this decision by offering you the best
possible interest rate. The prime interest rates pretty
much only go to household owners with fantastic credit
scores who can put down at least 10%.
You can finally calculate your monthly payment once you
know the type of mortgage you want, the number of years,
the interest rate and the down payment. An online mortgage
calculator will figure out your payment for you.
The longer you pay toward your initial loan, the more equity
is built up in your house. When circumstances are right,
you can dip into this equity with a home equity loan. Most
home equity loans are called HELOC (home equity line of
credit) or a second mortgage. These second mortgages
generally carry a higher interest rate than the first house
loan.
While people may take out a home equity loan to finance a
car or a trip, the best reason to take out a home equity
loan is to make improvements to the house that will increase
its value.
Selecting a house and a home loan is never an easy decision
Evaluating your goals, needs and type of loan is one way to
make the decision process easier.
For more information
about selecting a house loan, visit http://www.moneycontrol.com.
Copyright 2005 Maia Delfille. All rights reserved.
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Maia Delfille is the webmaster and operator for Fil House which is an
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