There are many types of mortgage loans. It can become quite confusing trying to distinguish between them all. Some appear to be low interest rate mortgage loans, but in reality have a high interest rate when all other components are considered. Many times these details are buried in the fine print of the loan. Smart borrowers research and understand exactly what they are signing.

Mortgages have several different important components. These relate to the duration of the loan, the stated initial interest rate, how the interest rate is calculated into the future, the required down payment, and whether there are points or fees assessed at closing. Each of these components must be fully understood by every potential borrower.

The duration for mortgages used to be standard. They were 30 year terms at the end of which the homeowners would celebrate by burning the mortgage papers. Those days are mostly gone, however it is still wise to stick with a 30 year mortgage. Some lenders offer longer terms which make the monthly payment smaller. However, these are not a wise choice.

When you extend the mortgage repayment period you are reducing the amount of principal you are paying down each month. This reduces the amount of equity you build in your home. Having equity is beneficial for many reasons. One of which is it makes refinancing easier down the line in the future if interest rates should drop.

Some mortgages have fixed interest rates. This means that the initial interest rate you see remains constant during the entire life of the mortgage. This removes unwanted surprises if the market interest rate suddenly increases. Many families budget for the initial payment amount then are caught short when interest rates go up. A fixed rate prevents this.

A fixed rate doesn't mean that you can't take advantage of future rates should they lower. You can refinance at that point taking advantage of a lower rate. Some mortgages have what are called adjustable rates. These loans have rates that change along with market interest rates. They can be artificially low with what are called "teaser rates".

You are best served to avoid adjustable rate loans and teaser rate loans. Selecting these loans can subject you to a drastically higher mortgage payment in the future. A fixed rate loan is predictable and you know exactly what your mortgage payment will be. There will be no surprises putting you in a position not to be able to afford your mortgage payment.

Low interest rate mortgage loans can in reality be traps. Look beyond the stated interest rate you are lured with and down to the fine print. That is where the relevant details are usually to be found. Make sure your loan's low interest rate is fixed and not adjustable. Ensure it is not a teaser rate. Pay attention to the details and be a smart borrower.