How to choose the right mortgage for you

Whether you're a first time home-buyer or looking to refinance your current mortgage, the options can seem overwhelming. The financial experts at Kiplinger have written a good, basic guide to the different types of mortgages, and how to figure out what might work best for you.

Fixed vs. Adjustable Rates

Fixed rate loans - As the name suggests, these loans retain the same interest rate for the life of the loan and guarantee that the monthly payment amount remains the same. This is often the better option if you're looking to stay in your home for a long time--and, of course, when the interest rates are low.

ARM's (Adjustable Rate Mortgages) - These mortgages generally have a constant, lower interest rate for the first few years; after that, the rate may increase or decrease for the remainder of the loan. This may be a good option if you only want to stay in the home for five to seven years, but watch out for possible penalties on early repayment.

Down Payments

The majority of lenders require a minimum down payment of 5% (3.5% for FHA loans), but a down payment of 20% or more would eliminate your need to pay an additional monthly cost for private mortgage insurance. If you can make a larger down payment, it could save you that money in the long run, as lenders will generally be more inclined to offer better interest rates.

15-year vs. 30-year mortgages

All other things being equal, a 15-year mortgage would mean a higher monthly payment than a 30-year mortgage. Yet, there would be less interest paid over the life of the loan, and may be an attractive option for those who want to retire without a mortgage.

These are all important factors to consider when choosing your home mortgage. I'm happy to work with you to review your different options and help you make the decision that works best for your unique situation. Call me at (510) 610-5223 or send me an e-mail at ed.ramos@fpfmail.com.