Despite the recent economic downturn, the cost of borrowing money to finance the purchase of a home remains extremely low. Couple that with falling real estate prices and the result is that there are some excellent buying opportunities right now. History has proven that real estate is still an excellent investment over the long term. Consumers need to understand their options when it comes to deciding what type of mortgage options they have. This column examines some of these strategies.

Leading lending institutions know that consumers are much more educated about mortgages than they used to be. One of the reasons for this increase in knowledge is technology. Undoubtedly, the Internet has provided consumers with the ability to better educate themselves about the many options available to them when shopping for a mortgage. Consumers today are better armed to negotiate with their bank for the best deal possible. In addition to the Internet, mortgage professionals like mortgage brokers and mortgage specialists now play a more prominent role in educating consumers about their mortgage options.

Of the many decisions that need to be made when buying a home, one of the most important is the appropriate type of mortgage. Specifically, consumers must choose the mortgage term that is best for them. A mortgage term is the length of time for which your agreement with your lender exists. A mortgage can be for a short or long term and usually ranges anywhere from six months to seven years in duration. Today, they can even go longer. During this time, the consumer agrees to pay a certain interest rate.

Another decision that must be made is whether to choose a fixed or variable interest rate. A fixed interest rate locks in a mortgage at a certain rate for a set term. A variable interest rate means that the rate will fluctuate with changing market conditions. A fixed rate offers security, but is usually higher than the variable rate. Some lenders offer a combination of fixed and variable rate mortgage within one. The decisions to obtain a short or long-term mortgage and a fixed or variable rate boil down to how much risk the consumer is willing to assume. Many owners are taking advantage of prevailing low interest rates by obtaining a long-term mortgage with a fixed rate. A long-term mortgage with a fixed rate provides the security and certainty of a set interest rate for a long period of time. This option makes sense if interest rates are on the rise. However, if interest rates are decreasing and one is willing to assume some risk, a short-term variable rate may be a better choice.

If you choose a short-term mortgage with a variable rate, you will need to closely monitor market conditions. If rates are on the rise, you will need to move fast to lock in at the current rate before rates rise even more. On the other hand, if you choose a long-term mortgage with a fixed rate you have some peace of mind. However, if the rates during the term of your mortgage drop, you will be overpaying and will not be able to break the mortgage without a financial penalty.

In order to understand all of your options, you should consult with your mortgage professional or lender for professional advice regarding the type of mortgage that best suits your personal needs.