The mortgage market can be very confusing if not understood properly and with things changing in the economy before buying a property it is a good idea to find out about the various kinds of mortgages in order to get the best deal.
A great deal of research should be put into this aspect of buying a property as you really want to be looking to get a mortgage that suits your needs at the time. The best place to start is online, you may be able to find out more about mortgage deals online. This will also save you time as it can be done from the comfort of your own home
There are many factors that you must also look into before deciding on what mortgage to choose we will look into this in detail other chapters.
Types of mortgages
Repayment mortgage. This is the type of mortgage whereby a portion of the loan including the interest is paid. With this type or mortgage the monthly payments cover the capital and the interest and the outstanding amount decreases until the mortgage is fully repaid at the end of the agreed term.
Interest only mortgage. With this form of mortgage the interest on the amount borrowed is paid. This is usually a much lower payment. With this form of mortgage, the mortgage is repaid by putting money into an investment plan. This type of mortgage can be risky like all other mortgages, but this also depends on how well the investment plan performs.
Mortgage lenders use the following options to determine how the interest on your mortgage will be calculated.
Tracker Mortgage. The interest on this form of mortgage is dictated by the movement of the mortgage base rate.
Variable Rate Mortgage. This is also known as a floating rate mortgage the interest rate of this form of mortgage varies to reflect market conditions and is also subject to go up or down.
Capped Rate Mortgage. With this type of mortgage provided by mortgage lenders the interest rates are subject to move up or down but will not rise above a certain level within a specified period.
Fixed Rate Mortgage. This form of mortgage offers you a fixed rate interest payment throughout the period of the loan. Regular payments are made so that the amount borrowed is paid off at the end of the term which can vary.
Discounted Rate Mortgage. This form of mortgage the interest charged will be set at a certain percentage below the lenders standard variable rates. The payments go up and down in line with the lenders standard variable rate. At the end of the term the payment will usually revert to the standard variable rate, but this always depends on the type of schemes conditions
Finding out about the various types of mortgages and selecting one that fully meets your needs is a very important aspect of buying a property and time should be taken to ensure that you select the best mortgage which will ensure that you avoid problems down the line.