5 Mortgage Types That You Must Avoid

Buying a house is an exciting thing for everyone. But you must make good decisions while purchasing a mortgage for your home.

Sometimes, your favorite house can become their worst nightmare. So, you should be considered while buying the mortgage because you have to pay back the mortgage in the next 15-40 years. If you don’t want to be helpless in the upcoming years, you should avoid some types of mortgages.

There are many types of mortgages available in the market. What are the riskiest types of mortgages? The mortgages you must avoid are discussed below:

40 Years Fixed-Rate Mortgage

The common types of fixed-rate mortgages are 15 and 30 years mortgages. But, some loans are stretched longer to 40-year fixed-rate mortgages. It is known as the most expensive mortgage.

If the mortgage is longer, it becomes difficult to pay back because the interest on 40-year ones will be more than the 15 and 30 ones. So, you will end up paying more interest than the actual amount.


Some people think it has many benefits, like lowering the monthly payments you have to pay. It is potential if you want bigger short termed saving. But, it has more drawbacks than benefits which are the following:


  • High price tags
  • High-interest rates
  • Larger money swings

Adjustable Rate Mortgage( ARMs)

In this type of mortgage, the interest rate at the start is low as compared to other mortgage plans. So, you will have to pay less interest for some time. But, after this, the lender can raise the interest rate.

The rise in interest rates is the most harmful thing. You don’t know the circumstances you will face then so it will be difficult for you.


You will be paying a small interest rate in the beginning.


The rise in interest rates will make it difficult for your budget.

Interest Only ARMs

In this type of mortgage, you will be paying a small interest rate for some time. In an interest-only mortgage, there is a structure that tells about the rise of interest rates in the future.

This mortgage has the most risk if you have lost your job and have no further source of earnings. It will become difficult for you, but you can’t avoid it.


The monthly payments will be low in the beginning.


Even after paying monthly payments, you must repay the total amount again.

FHA Mortgage

The government first approves the FHA mortgage, and the bank gives the loan. It’s primarily used when you can’t get a loan from private lenders.


The government approves FHA mortgages, so the borrower feels secure.


  • Limited mortgage terms
  • Not quite attractive to sellers
  • Mortgage insurance issue

VA Mortgage

VA mortgage is a government-approved loan that can be taken from banks or others. This mortgage is only provided to veterans or the persons of the VA department.


  • Provides low-interest rates
  • Doesn’t require a downpayment


  • Less equity in the property
  • The funding fee is high
Read the rest