Property purchasing and investment has become big business over recent years, and this is reflected in the wide range of mortgage products available for potential property purchasers these days.
With such a vast range of choices, it can be hard to decide what type of home loan to opt for. However, there are pros and cons with all mortgage types, and the best way to determine which is the best loan for you is to simply compare the benefits and costs.
Comparing Different Types of Mortgage Products
Fixed rate mortgages
One of the most popular types of mortgage, fixed rate mortgages offer fixed rates to consumers throughout the life of the loan or for a specified period. This can help those on a budget or with a fixed income to enjoy easier budgeting, as there will be no fluctuation in monthly repayments on the mortgage. However, if the interest rates fall those on a fixed rate will have to continue paying higher rates.
Adjustable rate mortgages
Also known as ARMs, these mortgages offer a lower starting interest rate, which can prove far more affordable for those with limited funds or those looking for great value. Although the interest rate on an adjustable rate mortgage can rise, it can also fall, and consumers interested in this type of mortgage have to be willing to take a gamble with regards to which way the interest will go, and by how much.
Two step mortgages
These mortgages are combined in nature, and are known as 5/25s and 7/23s. These are thirty year mortgage loans. The 5/25s offer a five year fixed rate mortgage followed by either twenty-five years of fixed rate repayments or a one-year adjustable. The 7/23s offer seven years on a fixed rate and then twenty-three years fixed rate or one year adjustable. The interest rate with these mortgages is higher than with a one year adjustable but is lower than a thirty-year fixed rate.
These mortgages can be taken over various periods, and can work on an interest only repayment basis as well as on a capital and interest repayment basis. Whether you decide to pay interest only over the term of the loan or whether you make capital and interest repayments, at the end of the loan term the remaining balance has to be settled. If you have been making interest only repayments, this balance will in effect be the whole principal balance of the loan taken.
These mortgages are paid on a bio-weekly basis, and each repayment is fifty percent of what a monthly repayment would be. However, because of the bi-weekly structure of the loan, this means that consumers make two extra repayments on the loan each year. Although these extra repayments may not seem like much, they can actually make a big impact on the amount of interest you repay on the mortgage over the entire term.
The above are a handful of the popular mortgage products offered to consumers these days. Whatever you needs or circumstances, and whether you have good or bad credit, it is possible to find a mortgage plan and package to suit your needs and your circumstances perfectly.