During the past decades, it was a common thinking that a mortgage loan is a mortgage loan no matter whichever is chosen-- it was thought that there is no option on mortgage interest rates. But this way of thinking is not applicable anymore because of the many mortgage loan products with varied mortgage interest rates available in the market.
So, before choosing a mortgage loan or any other personal loans, it is of great importance to decide which one is right for you. Finding the right mortgage loan means balancing your mortgage alternatives with your housing requirements and financial picture, now and in the future. Also the right mortgage is not just having the lowest mortgage interest rate but much more than that. And this "much more" will be determined by your personal condition. Your personal situation and your limits to pay for monthly mortgage obligation can be evaluated by answering the following questions:
1. What is your current financial status (this would includes income, savings, cash reserves and debt-to-cash ratio)?
2. How you expect your finances to changeover in the coming years--your improvement in terms of financial stability?
3. Have you plan to return the mortgage loan before your retirement?
4. How long you plan to keep your house?
5. How comfortable you are with your changing mortgage payment amount-- are you able to manage flexible payment?
The answers to these questions will give you the knowledge of your financial condition. Now the next step is to decide two key options:
1. Mortgage length,
2. Type of mortgage interest rate (fixed interest rate or flexible interest rate).
The length of mortgage loan can be 15 years (minimum); can be 20, or at 30 years (maximum). While choosing a fixed or adjustable mortgage interest rate you should be aware of the facts that the adjustable mortgage interest rate is more risky because the interest rate will change, while a fixed-rate loan offers more stability because of the locked-in rate.
You will be able to pay off a shorter-term loan more quickly, but your monthly payments will be substantially larger. Long-term fixed-rate loans are well-known because they offer certainty, and many people find that they are easier to fit into their financial budget. Though, in long run they will cost you more, but you will have more available capital when you need it, and you will be less likely to default on the loan should an emergency comes.
In the light of above mentioned ideas and constraints, it is clear that the key to select the appropriate mortgage loan or any other personal loan for your needs should fit comfortably into your entire financial condition, that is having payments within your budget and comfortable level of risk connected to it.
