Michigan’s Department of Insurance and Financial Services (DIFS) is offering guidance to those thinking about taking on a home mortgage. There are many different types of mortgage loans, each of which have risks and benefits depending on an individual’s financial situation. Fixed-rate mortgage is a home loan with an interest rate that remains the same over the lifetime of the loan. Adjustable-rate or variable rate mortgage is a loan with an interest rate that changes over the lifetime of the home loan. As you consider a mortgage, but are unsure which type is right for you, DIFs encourages you to consider the following questions:

  • Is my income enough to cover higher monthly payments if interest rates go up?
    • Don’t just ask for the lowest monthly payment without understanding the terms of the loan and whether it’s possible for your monthly payments to increase based on the market.
  • How much of a down payment can I afford to make?
  • Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future?
  • How long do I plan to own this home?
    • Changing interest rates could significantly impact the amount you owe over the lifetime of your loan depending on the type of mortgage you choose.
  • Do I plan to refinance the loan at any time? When?
  • Do I plan to make any additional payments or pay the loan off early?
    • Some adjustable-rate mortgages have a prepayment penalty.
  • Am I a military veteran, on active military duty, or a surviving spouse of someone in the armed forces who may be eligible for a VA backed loan?

Michiganders considering applying for a mortgage can find more information from DIFs at the following link: Mortgages: Fixed Rate vs Adjustable Rate.