This article describes some of the different options you may encounter as you shop for a mortgage.
Fixed-Rate Mortgages: As the name implies the interest rate is set at the time you take out the mortgage and remains constant over the life of the mortgage.
Adjustable Rate Mortgages (ARMs): With an adjustable-rate mortgage, the interest rate and monthly payments can change as interest rates change.
Other Issues
Negative amortization: Some lenders offer mortgages with lower monthly payments than what is needed to pay interest and ultimately pay off the mortgage. Avoid this.
Balloon mortgages: Balloon mortgages are similar to fixed-rate mortgages with steady monthly payments using a 15- or 30-year amortization. However, with a balloon, there’s a large final payment due at the end.
