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Deerfield Mortgage

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Types Of Mortgages Categorized By Interest Rates

There are a variety of types of mortgages available in Deerfield, Illinois.  Usually they are categorized depending on interest rate or if they are special mortgage types only offered based upon specific qualifications.

The three main, interest rate categorized mortgage types offered in Deerfield, Illinois are fixed rate mortgages, adjustable rate mortgages and balloon mortgages.  These mortgages are named according to the way the interest is handled on the account.

Fixed rate mortgages have an interest rate that is set when the mortgage is created.  The interest will stay at that set rate for the life of the mortgage without any change.  One of the biggest advantages of a fixed rate mortgage is the monthly payment is always the same.

Fixed rate mortgages can be nice when the market has a rise in interest rates because the mortgage interest rate will stay at the lower fixed rate.  However, if interest rates fall, the borrower in Deerfield, Ilinois is stuck with paying the higher fixed interest rate.

Adjustable rate mortgages are mortgages that have an interest rate that changes.  Usually the interest rate is fixed for a short period, commonly the first six months of the loan.  Then after that time the interest changes based upon the interest index the lender in Deerfield, Illinois uses.  This means the borrower’s monthly payments will change form month to month.

Adjustable rate mortgages do allow a person in Deerfield, Illinois to save money when interest rates fall, but they mean the borrower has to pay more when rates go high.  However, some lenders will adjust the rates only at certain times, like every three months or even just once a year.  Additionally, many adjustable rate mortgages will have a set interest rate that is the highest possible for the borrower to be charged.

Balloon mortgages are similar to a fixed rate mortgage.  The interest rate is fixed at the time the mortgage is established in Deerfield, Illinois and the monthly payments are always the same.  The difference, though, is with a balloon mortgage the term or length of the loan is much shorter.

A typical fixed or adjustable rate mortgage will have a term of 30 years.  A balloon mortgage is more likely to have a term for a shorter time such as 5 years.  At the end of the term the borrower in Deerfield, Illinois must pay the remaining balance.

One of the perks of a balloon mortgage is that the interest paid overall is far less, so the borrower is actually getting their home for much cheaper then with another type of mortgage.  However, if a borrower can not afford to pay the balance when it comes due then they will be faced with some major problems.

These three major types of mortgages cover the category of mortgage interest rates available for residents of Deerfield, Illinois.  There are other types of mortgages, such as a FHA mortgage for a first time homebuyer or a home equity loan which is a second mortgage taken against the equity in the home.