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Different Types of Home Loans

Types of Home Loans:

If you have a great credit history and steady employment, it is not too difficult to acquire a home loan. In order to be sure that you get the best loan for you, it is important that you understand that there are several different types of home loans. Knowing more about each type of loan will help you make an informed decision.

Variable rate home loans:

The basic loan for a first time home buyer generally has a variable interest rate which means that as interest rates fall, so do your monthly payments. This type of loan will often start with a lower rate than a fixed rate loan. The downside to a variable rate home loan is that if the interest rates begin to climb, then your payments will also increase. If you are in the house for a short period, say of five years, before you plan to sell it, then this type of home loan may be the best for you.

Fixed rate home loans:

A fixed rate loan is probably the most common of the different home loans that are available. This loan has a set interest rate that will stay that way for the entire life of the loan and never change unless you refinance the loan. If you are on a set budget, this loan will help you to organize your monthly payments and it makes it easier to stay on a budget.

Home Equity Line of Credit (HELOC):

This is a type of home loan where you borrow against the equity in your home. This can be a way to get extra money for medical bills, a child heading off to college, or even just to make ends meet during a time of financial challenges. This loan is considered a second lien on your home and is generally at a higher interest rate than your original mortgage.