Buying a home may seem like a huge decision. Ultimately, the process turns out to be a number of huge decisions you will need to make. 

One of the most important choices you'll ever make is selecting the type of mortgage loans that fit your needs now and in the future. If there’s one thing we can learn from the economic meltdown in our country, it’s this. Being uninformed and choosing the wrong home loan options and home refinance options can cost you a lot of money, and even lead to game-changing financial problems for all of us.

So don’t be one of those people! Read below to learn the fundamentals about the type of mortgages and home refinance options that may suit you and the mortgage loan options available.

Type of Mortgage Loans Explained:

Mortgage Loans can generally be categorized by the term of the loan, how it will be repaid, the amortization and variability of the rate. There are literally as many mortgage loan options as there are people looking for them, so for now we will address the broad categories that most people looking at different types of mortgage loans and refinance options will be considering.

Fixed-Rate Mortgages

One of the most common type of mortgage loans, Fixed Rate means the loan is fully amortized, (paid in full) at the end of a fixed loan term at a fixed APR, or rate. The biggest advantage of a fixed rate mortgage loan option is it gives the borrower the peace-of-mind of knowing that their payment will remain the same for the entirety of the loan -- and ultimately their home will be paid for in the end. More about fixed rate mortgage loan options.

Adjustable-Rate Mortgages

Also known as a variable rate mortgage or ARM, these type of mortgage loans and home refinance options are tied to various financial indexes and “adjust” along with current market conditions – up or down. Many adjustable mortgage loan options include a period of time in which the rate will be “fixed”, usually from 6 months to 5 years, before rate periodic rate fluctuations may occur. The benefit of these loans is that the consumer will benefit from a lower rate and monthly payment. More about adjustable-rate mortgage options.

Mortgage Refinancing

Over the past decade, record numbers of Americans have taken advantage of historically low mortgage rates with home refinance options for their existing mortgages. Home refinance, done correctly, can help you reduce the costs of financing your home, both monthly and overall. But keep in mind, home refinancing options are not “one-size-fits-all.” Depending on your situation, refinance may or may not be the right mortgage loan option for every situation. More about mortgage refinancing

Home Equity Lines of Credit (HELOC)

Although technically this is not a type of “mortgage” loans, home equity lines of credit or HELOC’s have become increasingly popular over the years as a financial instrument where a mortgaged residence is leveraged for an additional source of funds. HELOC’s are great loan options when used wisely, as they can provide a source of emergency funds or to finance reasonable home improvements, maintenance and repairs. There are some downsides though, and it’s important to understand exactly what you’re getting into with this type of loans. More about Home Equity Lines of Credit (HELOC)

Upfront Mortgages

When you’re reviewing your mortgage loan and home refinance options, there’s usually one thing missing - transparency. By transparency, I mean, getting to see all the facts before you make your decisions. Whether you know if or not, you and your mortgage broker are at odds – you want the lowest rate -- and they want to give you the highest possible rate (they get paid commission on the difference). Upfront Mortgages are a new type of mortgage loans created by the good “Upfront” brokers and lenders out there who are committed to providing home loans the right way – giving you all the information and figures you need Upfront, and getting paid on a flat fee that is disclosed. More about Upfront Mortgage Brokers and Upfront Lenders