Getting Your First Mortgage

Many people know that when you take a mortgage, a greater part of your payment will go towards covering interest. It is not uncommon to pay thrice the actual purchase price of your house at the end of your mortgage term. It is therefore important that you do enough shopping around before you go for your first mortgage. This will help you to get a mortgage whose interest rate is manageable, which will not end up making you paying through the nose. You should ensure that when getting your first mortgage, you receive the best possible product. Your first mortgage will be one of the major choices you will have to decide on. In order to help you make a well informed decision, you need to understand what mortgage involves in the first place.

Many people misunderstand what mortgage really is, mistaking it for a loan. This is not really true. Here is the difference - in a loan, you receive something from the lender while in a mortgage, you are actually the one giving the lender something.

Before you get your first mortgage, you need to understand the types that are in the market at the particular time. Let us take a look at some of the common first mortgages available.

* Fixed-Rate First Mortgage or also called Fixed Interest Mortgage

In this type of loan, the interest rates are set all through the term of the mortgage. This may be a good option for your first loan since there will be no unexpected fluctuations. The interest rate of your fixed-rate mortgage will remain the same whether the term of the mortgage is 10, 15, 20, or 30 years. You will clearly know what you are expected to pay since what you are paying for both the principal and interest rate will not change. This means that if this is your type of first mortgage, you will be better off in case market interest rates shoot up.

The down payment needed for the fixed-rate first mortgage is generally low, at times just about 5 per cent of the initial purchase price.

* Adjustable-Rate First Mortgage or also called Variable Interest Mortgage

There are times when it may be better to take your first mortgage as an adjustable-rate one. This is important in the case where the interest rates are clearly expected to go down. In this type of first mortgage, both your monthly payments vary depending on the prevailing market rates. This means that when the market rates go down, you will be able to make lower payments.

Another situation when it is better to opt for adjustable-rate first mortgage is when you expect to get higher incomes within a few years.

* Balloon First Mortgage

This type of first mortgage is appropriate in case you do not expect to own the house for a long time. This way, you will be able to get lower interest rates.

This article was written by Arek Zbikowski. For more information on getting your first mortgage feel free to visit my site at http://www.atozmortgageguide.com