Your fixed rate mortgage Information
If you are planning to buy a new home one of the most important aspects of the process is getting your mortgage. A mortgage is a loan that will stay with you for decades so it is important to get the best possible deal so that you can save yourself as much money as possible.
The first part of getting your mortgage is to understand the difference between a fixed rate and a variable rate mortgage. A fixed rate mortgage means that your interest will remain constant over the life of the loan and your monthly mortgage payment will also remain the same. A variable rate mortgage will change depending on the current interest rates. You will usually get a low interest rate for a fixed period of time and the interest rate will then be adjusted on a yearly basis according to current market conditions.
When interest rates are low and you are planning to stay in your home for a long period of time, it is a good idea to get a fixed rate mortgage. If interest rates are high or you are planning to stay in your home a short period of time you may want to consider a variable rate mortgage. No matter what type of mortgage you are planning the most important thing you can do is lock in you mortgage rate.
Locking your mortgage rate guarantees you will receive the interest rate you locked even if the mortgage rates increase. When you lock your mortgage rate make sure to get it in writing so there is no confusion later on. If the lender won’t put it on paper you should find a new lender.
When you lock your interest rate it will usually last one or two months. In some cases you can pay to have the locked interest rate for a longer period of time. You can think of it as taking out insurance on your mortgage rate.
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Article author: Sebastian Palmer
“MORTGAGE LOAN TYPES”
Mortgage loan means that borrowing the money from the loan lender by using property. Many types of mortgage loans available for the borrower. Borrower can choose the type of mortgage loan that suits his or her needs. Borrower can choose fixed rate mortgage or Adjustable rate loans as per requirement. Types of mortgage loan are:
Fixed rate mortgages loan
Adjustable rate mortgages loan
Jumbo loans
Balloon loans
Fixed rate mortgages loan:
Fixed rate mortgages loan is the best mortgage loan. In this the rate of interest is fixed for whole loan period. This loan is suitable for the person who is going to stay in a same house for a long period. If the
borrower want to shift the house within 7 year then they can use the adjustable rate mortgage loans. Normally loan period is 10,15,20,25,30 and 40 year but 30-year fixed rate mortgage is famous because it offers the smallest monthly payments of fixed rate loans while providing for a never-changing schedule. Another type of this loan is 20-year mortgage loan. In this, loan period is 20 years and interest rate will be lesser than 30-year mortgage loans. In 15 years loan, interest rate will be less as compared to 30 and 20-year mortgage loan.
Adjustable rate mortgages loan:
Adjustable rate mortgage loan is suitable for the person who always shifts the home and the person who is looking for low interest rate. This loan offers the lowest initial rates by sharing the risk of higher loan rates between borrower and lender in future. In this the interest rate will be fixed for first three, five and seven year but after that the interest rate will vary every 12 months. The interest rate will vary from 0.5 to 2 percent. As the interest rate is less many peoples prefer the adjustable rate mortgage loans.
Jumbo loans:
Jumbo loans are preferred when a person want a large loan amount more than $ 1 million. Down payment for this loan will be 5%. To purchase a expensive home jumbo loans are needed. Jumbo loans is also known as non conforming loans. When a loan amount is larger than the conforming limit then it becomes a Jumbo Loan or non-conforming loan with slightly higher interest rates. Jumbo Loans can be combined with historically low mortgage rates so that they provide greater flexibility to some home buyers to purchase the home they want. Interest rates is low so consumer interest in Jumbo Loans is very high.
Balloon loans:
These loans are the short-term mortgage loans which is similar to a fixed rate mortgage loan. The difference is that balloon loans provide a level payment feature during the loan term. They have maturities of usually 5 - 7 years. The balloon mortgage with this option is popularly known as 7/23 or 5/25 convertible.
Article author: sahil dhingra
The most basic distinction between different mortgages depends on how the interest rate is charged. There are two types of mortgages, the first one is the fixed rate mortgage and the second is an adjustable rate mortgage. In case of a fixed rate mortgage, the rate of interest charged by the lender remains the same through out the period. The interest rate charged in case of fixed rate mortgage is unaffected by the general interest rate in the market. On the other hand, in case of rate adjustable mortgage, the interest rate is adjusted to account for the changes in the general interest rate. These adjustments are made periodically. In case the general interest rate rises there is a an upward correction in the rate of interest that is charged for the mortgage and in case there is a fall in the general interest rate, there is a downward correction made. Both these interest rate loans have their advantages and disadvantages, and it is impossible to say which one is better. This answer varies from person to person depending upon his personal choice and risk appetite.
In case of fixed interest rate, you enjoy the advantage of stability. Here you know for sure that come what may, your monthly interest payment will not vary; this scheme is best for risk adverse people who like to plan things in advance. On the other hand in case of fixed rate mortgage, the lender will generally charge you higher than adjustable rate mortgage as the lender loses his chance to increase the rate in accordance with the market.
Adjustable rate mortgage is for the adventurous type of investors; here the interest rate changes depending on the change of rate of the chosen index. It is best to go in for an adjustable rate mortgage if you are sure that the interest rates will fall in the years to come. But making such a prediction is quite not humanly possible and this loan scheme is thus quite risky.
Generally, the lenders offer a very low starting rate which is also called a teaser. These rates lure the investors in to accepting the loan scheme and they end up paying higher interest rate as and when the rate of the underlying index increases.
There is also a third type of mortgage scheme that is now available in the market. It is called the hybrid mortgage loan scheme. It incorporates the features of both the fixed rate ad the adjustable rate mortgage. Here, you can pay a fixed rate of interest for a certain number of years and then the rate is adjustable as per the prior decided plan.
William King is the director of Aid and Trade Wholesale Dropshippers Directory: http://www.aidandtrade.com , Pakistan Property & Real Estate Portal: http://www.zameen.com , and Dubai & UAE Property & Real Estate Portal: http://www.bayut.com . He has 18 years of experience in the marketing and trading industries and has been helping retailers, entrepreneurs and startups with their product sourcing, promotion, marketing and supply chain requirements.
Article author: William King
