Home loan or Mortgage is the most personal kind of debt. Nowadays, I found that most of us, have no choice but getting a mortgage to own our first house, no matter you invest in your property or just want to own it and start your lovely family. However, there are some side effects from Mortgage - the emotion stress! I found that people around me will tend to be impacted by it. They always worry about the mortgage monthly payment and start locking themselves in a trap where they must keep on working to pay down the mortgage. The indirectly adding a lot of stress inside them.

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So I think there are something that we should know about mortgage and understand it. So what kind of home loan do you have?

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The first kind of loan is an adjustable-rate mortgage loan. This means the interest rate you are paying is depending on the federal interest rate. This isn’t a bad way to go if your income also depends on the general economy. For instance, you own your business or you are a salesman. The theory is when the economy is good, the rates go up and on the other hand, people will spend more and your sales revenues are going up too. However, life is unpredictable. So this will be some risk there.

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The second kind of loan is the fixed-rate mortgage where your interest rate is locked. So that will be great if the rate is low, miserable if the rate is high. Anyway, there is an advantage in that it’s easier to budget for since the payment is locked too.

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Another kind of mortgage loan, called Balloon Loans where you can pay little at startup but more after that. This will assume that you will make more money as you get older. This kind of loan works for some people, but there are some risks that make it become a bad gamble. You have to bet that there is nothing happen between the periods and make your plan out of order, if not, even a surprise baby could kill you in plan.

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Besides the type of loans, there is one term that you need to be aware of. It is Private mortgage insurance (PMI). You must know how this PMI works. This is an insurance that you must pay as part of your house payment until you have paid off 20 percent of your home’s appraised value. This money is don’t make any contribution to you home equity! If you want to save the payment, usually around $100 to $300, then you must find some way to get the 20 percent as soon as possible. This is also a factor that you must consider in Mortgage refinancing too.

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