Deciding Which Loan To Take Out

As soon as I realized that my personal financial picture was a little bleak, I started thinking about taking out a personal loan. I wasn't really looking forward to going into debt, but I knew that if I wanted to solve a few short-term problems, a loan would be the way to go. I talked with a few of my local financial institutions to get a good idea of what they could offer me, and then I sat down to go over the paperwork. It was incredible to see how much money I could save by securing a lower interest rate. Check out my blog for more information about loans.

Two Options For Your Home Mortgage


If you're buying a home, chances are that you need financing in order to purchase it. That's where local area lenders come in since they can help get you a mortgage to help pay for it. However, there are different types of mortgages available, and it helps to know the differences between them.

Fixed-Rate Mortgages

The most popular type of home loan is a 15 or 30-year fixed-rate mortgage. Many home buyers pick the 30-year option because it makes their home payments affordable with the lowest monthly payment over the course of the entire loan. However, it results in paying more over the course of the entire loan. A 15-year mortgage offers a lower interest rate over a shorter period of time but will have a higher monthly mortgage payment due to the loan being repaid over a shorter period of time. 

While your mortgage interest rate is fixed with this type of mortgage, your monthly payment varies with how much goes towards the principal on the home and toward. This can be seen in the loan amortization schedule. You'll notice that the initial years of the loan are going to be primarily interest payments with very little going towards the principal. In the later years of the loan, it is flipped where the monthly payments are made up of much more principal than interest. 

Adjustable-Rate Mortgage

As the name implies, an adjustable-rate mortgage is going to have an interest rate that is recalculated throughout the life of the loan. This is based on the current interest rates at the time, which means that the interest rate can go either up or down. If you feel like interest rates will continue to decline, you may want an adjustable-rate mortgage to save money. 

An adjustable-rate mortgage will adjust the interest rate at a set period of time, which depends on the terms set by your lender. The interest rate may be every month or even every year. One thing to keep in mind is that there are caps on how much the interest rate can go up and down, with there being limits in place to make the loan manageable to pay if the interest rate goes up considerably. 

Another thing to know about adjustable-rate mortgages is that they may or may not have an introductory lock period, which means you are guaranteed to not see a rate change during the first year or two of the mortgage. 

For more information, contact a company like Capital On Demand.


2 June 2021