A first mortgage is the primary loan borrowed to pay for a home. Shopping around for a home loan or mortgage will help you to get the best financing deal. A mortgage is a product, just like a car, so the price and terms may be negotiable. You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars.

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Adjustable Rate Mortgages
The interest rate on an adjustable rate mortgage may be adjusted periodically, usually in response to changes in the economy. The interest rate is fixed for a certain period of time (the adjustment period) and then varies depending on market rates.

• Lower initial payments
• Ideal if you plan to own a home short-term
• Fixed rate during adjustment period
• If interest rates fall, your rate falls too
• May allow you to qualify for a larger loan.

• Less long-term stability
• After the adjustment period, interest rates typically rise

Balloon Mortgages
The balloon mortgage is a fixed-rate mortgage with a shorter term than traditional mortgages have. The principal and interest are amortized over a longer period (30 years) than the actual term of the mortgage. At the end of the balloon period, you may pay off the outstanding balance with a lump-sum payment or exercise the option to refinance for the remaining term.

• Low interest rate
• Shorter term financing
• Low monthly payments
• Protection from rate increases

• Potential unfavorable refinance terms
• If you do not refinance, you have to pay balance at end of term
• Risk foreclosure if you cannot make balloon payment

When rates are low, an ARM maybe the idea choice if you know you won't be living in your home for a long time. The same is true of a balloon mortgage. However, a fixed rate mortgage can offer stability and long-term benefits that add up over the years. So think carefully and consider how long you plan to live in your home while deciding which rate to choose.