Mortgage Rate Arrangement Simplified?

When looking for a mortgage, it’s essential to understand the different products that are available so you can be sure you get the right one for you. Lenders offer different interest rate options and this will affect your monthly payments. So choosing the right deal could save you money.

With so many product choices available it is essential you get professional indepenedent advice.

Types of mortgage products available:

Standard Variable Rate Mortgage

With this mortgage, your payments will go up and down as the lender’s standard variable rate goes up or down. Usually any changes in the lenders variable rate will be in line with movements in the Bank of England base rate. The Bank of England Monetary Policy Committee reviews this rate on a monthly basis.

Is it right for me?

Yes – if you can afford to pay more when mortgage interest rates go up and want to take advantage of lower payments if rates fall.

No – if during the early years you would be unable to cope if repayments increased because of rising interest rates.

Base Rate Tracker Mortgage

This is similar to a variable rate mortgage. But the interest rate will go up and down exactly in line with any changes in the Bank of England base rate. Your mortgage payments will go up and down too as the interest rate changes. The tracker period is usually for a specified time, which can be from one year up to the lifetime of the mortgage loan. At the end of the tracker period, your mortgage interest rate will change to the lenders standard variable rate. This product may carry an early repayment charge.

Is it right for me?

Yes – if you want to be sure your mortgage rate falls by the same amount as the Bank of England base rate falls, but the drawback is the mortgage rate also rises in step when the base rate increases.

No – if you find yourself locked into a rate above the base rate, which may be higher than the standard variable rate.

Fixed Rate Mortgage

Your mortgage interest rate is fixed for a set period only, during which your mortgage payments will stay the same. At the end of the fixed rate period, your mortgage interest rate will change to the lender’s standard variable rate. Fixed rate mortgages are usually available for between one and ten years, however they can be available for longer periods depending on market conditions. This product may carry an early repayment charge.

Is it right for me?

Yes – if you need to budget with certainty for the next few years, or you think mortgage interest rates will rise, or both.

No – probably not if you think mortgage interest rates will fall.

Discounted Rate Mortgage

The lender offers a discount off their standard variable rate for a set period, normally one or two years. Your mortgage payments will still vary in line with changes in the standard variable rate. At the end of the discount period, your mortgage interest rate will be the same as the lender’s standard variable rate. This product may carry an early repayment charge.

Is it right for me?

Yes – if money is tight when you first take out the mortgage, but you’re confident your income will increase.

No – if you won’t be able to cope if interest rates rise later on, increasing your payments.

Capped & Collar Rate Mortgages

With a capped rate mortgage the interest rate can go up or down in line with movements in the lender’s standard variable rate, but cannot go above a set upper limit, known as the ‘cap’ or ‘ceiling’. This type of mortgage can also have a set lower limit, known as the ‘collar’. For these mortgages the interest rate can move between these limits but cannot fall below the collar or go above the cap. This product may carry an early repayment charge.

Is it right for me?

Yes – if you like to budget with some certainty, think mortgage interest rates might rise above the cap, or you want the security of knowing your payments cannot rise above a set level and would like to benefit from any fall in interest rates.

No – if your mortgage adviser can find a fixed rate set at a lower rate than the capped rate, and you think rates are unlikely to fall below the level of the fixed rate deal.

Cashback Mortgage

The lender pays you a cash lump sum after completion, which you can use for any purpose. This product may carry an early repayment charge.

Is it right for me?

Yes – if you need a cash lump sum, for example to do up your home, or you expect the cashback to more than compensate for any rises in interest rates during the period when an early repayment charge may apply.

No – if you can manage without a cashback now and can get an alternative deal.

Remember your home may be repossessed if you do not keep up repayments on your mortgage.

Fixed Versus Adjustable Mortgage Rates

Buying a home is one of the biggest decisions most people make in their lifetime. It is a huge investment and for many the idea of committing to a mortgage (one that could last up to 30 years to pay off) is a stressful experience. When buying a first home there are many factors to consider. What type of house do you want? How much can you afford? Will you be able to build equity in the current housing market? However, one of the biggest challenges for many new home buyers is understanding the various mortgage options and how the constantly fluctuating interest rates can affect them. Here’s how to understand the difference between fixed rate mortgages and adjustable rate mortgages.

Fixed Rate Mortgages
Fixed rate mortgages offer the buyer a consistent rate for the period assigned to the mortgage. For example, if you lock in at a 30 year mortgage your rate will not increase for the life of your loan. The benefit of this type of mortgage is that it makes it easier for the borrower to budget monthly expenses because payments remain the same every month. These types of mortgages are easy to understand for the new home buyer and are good for borrowers who are at the upper end of their budget and can’t afford any surprises. Fixed rate mortgages are also good for home buyers that plan to stay in their home for the duration of their mortgage. However, fixed rate mortgages don’t protect buyers if home values drop. In this scenario payments can become overvalued as equity falls behind.

Adjustable Rate (ARM) Mortgages
In comparison, monthly payments of adjustable rate mortgages go up and down each time the rate resets. Adjustable rate mortgages reflect short-term rates and are usually lower than the longer term mortgages. ARMs allow home buyers to purchase a larger more expensive home because interest rates are lower. The lower monthly payments are good for borrowers who want to take advantage of lower rates but have room in their budget if rates increase. However, many ARM loans begin with teaser rates that are below the indexed rate and in the long term may increase as rates reset to a market rate.

Let’s look at an example. Monthly payments on a $400,000 loan for a 30 year fixed rate mortgage at 4.31 percent would be $1981.84 compared to a 1 year adjustable rate mortgage at 3.00 percent, which would be $1686.00 resulting in a savings of approximately $300 per month.

Most first time home buyers rush into the housing market when rates are low without really understanding what they are getting into. Mortgage rates are important but borrowers have to consider the overall cost of home ownership including things such as the amortizaton period, payment options, and how the different types of mortgages can effect payments over time.

Often many people think that taking on a longer mortgage keeps repayments low. However, there is significantly less total interest repayable on a 15 year term than a 30 year mortgage.

Buying a first home can be exciting but it is also very scary. Especially for first time buyers who don’t have a clear understanding of interest rates and various mortgage products. Although there is a lot of stress that comes with purchasing a first home, it is a great investment and one that you will rarely regret as long as you ensure you know what you are getting into.

How To Find The Best Mortgage Rates? Some Must Know Tips

Well, if you are planning to buy a house with the help of mortgage loans, then you should always try to select the perfect mortgage plan which is well enhanced with a low mortgage rate. Well, I would like to tell you that the mortgage rates have increased from the last few months. It is quite difficult to look out for the perfect mortgage plan which is well enhanced with a low mortgage rate. Well, if you are looking out for the best possible mortgage cost, then you should consider some of the major aspects.

Acquiring the mortgage plan with wrong rates could really prove out to be your worst mistake. You should always try to select a perfect mortgage plan that can simply prove out to be very much beneficial to you. You should always consider your financial situation before selecting the perfect mortgage plan for yourself. It is also a fact that there is no magic formula required for selecting the perfect mortgage plan. Well, if you are not aware, then I would like to bring this to your notice that mortgage loans are of mainly two types. They are fixed rate mortgages and adjustable rate mortgages.

1. Fixed Rate Mortgages

Fixed rate mortgage plans are gaining a lot of popularity in the market. Most of the home owners try to select the fixed rate mortgages so that they can easily improve their financial condition. In fixed rate mortgages, the monthly payments and the mortgage amount remains the same throughout the loan period. It is really the best method because you remain familiar with the amount that you have to pay. Fixed rate mortgages are mainly meant for 15, 20 or 40 years.

2. Adjustable Mortgage Rates

Well, I would like to tell you that in case of adjustable mortgage cost, you may have to select a perfect adjustable mortgage rate loan according to your financial condition. The mortgage rates keep on changing according to the financial condition of the investment market. It simply means that you can also enjoy the lower mortgage amount.

Well, I would like to tell you that adjustable mortgage cost are very much convenient in the long run. If you want to acquire the mortgage rate for a short time period, then you can simply select the fixed rate mortgages. This is also the best method through which you can protect yourself from paying extra money. So, if you want to acquire low mortgage amount, then you should read this article of mine. Below mentioned are some of the major tips through which you can acquire the low rate mortgage for your self.

1. Comparison between Various Lenders

If you want to acquire the best mortgage rate for yourself, then you should compare the rates of various lenders. You can also shop for your mortgage because this can simply help you in acquiring the perfect deal for your mortgage plan. If you want, you can also obtain the quotes of various mortgage lenders. You can easily compare the quotes of various lenders and then you can simply select the perfect plan that can match with your financial needs and requirements.

2. Keep Your Credit Great

Well, if you want to acquire the best mortgage cost for yourself, then you can simply keep your credit looking great. It is really the best method through which you can acquire the best rate for your mortgage plans. If you are well enhanced with a good credit score, then you will face no problem in acquiring the good rates for your mortgages.

3. Investigate About the Hidden Fees

You should always investigate about the hidden fees of the lender because most of the mortgage lenders discover hidden fees which the borrower has to pay. So, before you select a perfect mortgage plan for yourself, you should always try to investigate about the hidden fees. You can also enquire about the hidden terms and conditions.

4. Always Try Negotiating

Negotiating is really the best way through which you can acquire best results for yourself. You can simply obtain positive results related to your mortgage plans with the help of negotiating. You can simply negotiate with the lenders.

So, these are some of the efficient ways through which you can acquire the best mortgage rate for yourself.