Without A Doubt Better Fixed Rate Mortgage
As we are seeing base lending rates plummeting to an all time low, now is an excellent time to be searching for a new mortgage product in the hope of saving some monthly financial budget, and hopefully a lot of money in the future. But if you are thinking about starting to compare mortgage loan rates, what exactly are all of these different types of mortgages available on the market?
First, for about a third of home owners, the fixed rate mortgage is the favourite type of product. With this type of mortgage you have agreed with your selected bank that for a certain amount of time you will be charged a fixed interest rate. The fixed term period might be a few months up to a few years, it depends on the offers available on the market. How attractive the interest rate is will vary by on how long you are fixing it for. The shorter the time period, the more reduced the risk there is to the bank that the rates could go back up in that time period, so normally the interest rate offered is typically more favourable. It is this fixed aspect of the mortgage that many home owners do want. For the agreed period you know exactly what will be spending on your mortgage. There can be no interest rate increase surprises to affect your budget. You are sure that unless you change your mortgage, exactly what you will be paying.
But this is not only an advantage, it is also seen as a disadvantage. If base rates do fall further, as has happened drastically currently, then the amount that you are paying doesn’t benefit. And this is the gamble of this sort of mortgage. You know precisely what you will be paying, regardless of whether interest rates go up or down.
When your fixed rate mortgage has ended, you might then have a tie in period with the bank during which you have to stay with the bank on their variable rate mortgage. This is the payback to the bank when they have given you a particularly good fixed rate mortgage. A variable rate mortgage is the basic mortgage that a bank will offer. It is their basic no frills mortgage and moves with the base rate, although not always matching the base rate exactly.
Usually brokers will suggest that all customers on the bank’s variable rate mortgages should look at their mortgage and think about moving to another product, or bank. It is usually not reduced in any way and is at risk of going up with every rate change. Quite often this type of mortgage is looked at as the bank’s way of earning money. They are typically no frills, no savings and a sign that you need to be looking at your mortgage. If this is what you have currently got, then it is well high time that you decided to compare mortgage loan rates and find yourself a brand new mortgage.
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Posted by HUD Homes Articles
on Jan 16 2009. Filed under Fixed Rate, Mortgage.
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