All About Mortgages
Buying a home is a big decision, and one of the most important things to understand is the different types of mortgages. A mortgage is like a special kind of loan that helps people buy their dream homes. We'll talk about different kinds of mortgages, how long it takes to pay them off, and even check out some interest rates. Let's dive in!
Fixed Rate Mortgage
Imagine you have a jar of cookies, and you promise to eat the same number of cookies every day. A fixed-rate mortgage is similar because you pay the same amount of money for your home loan every month. It's predictable, like knowing you'll have the same number of cookies each day. Most fixed-rate mortgages take about 15 to 30 years to pay off.
Adjustable Rate Mortgage
An adjustable-rate mortgage is a little different. It's like a jar of cookies where the number of cookies you eat each day can change. Your monthly payment can go up or down depending on interest rates. These usually start with lower payments, but they can change after a few years. ARMs can last 3, 5, 7, or 10 years before the rates change.
Interest Rates
Interest rates are like the price you pay for borrowing money. Right now, in 2023, the interest rates for mortgages are around 3-4%. This means if you borrow $100,000, you might have to pay an extra $3,000 to $4,000 each year.
Time to Pay Off:
Remember we talked about fixed-rate mortgages taking 15 to 30 years? It's like going to school. Some people finish school quickly (15 years), and others take more time (30 years) to pay for their house. The faster you pay, the fewer "cookie" payments you need to make.
