Types Of Mortgage Loans
If you decide to get a mortgage, you’ll see that there aren’t just a few types to choose from, but instead quite a lot. There are so many different kinds that you may be unsure as to what to do, especially if you don’t know what any of them are. You might choose to use an online mortgage broker to help you explore a few kinds that may be good for you.
Repayment mortgages are pretty much the most common and basic type of home loan. With these, you repay some of the money that you owe, plus interest.
Interest only mortgages
With an interest only loan, you’ll be required to pay the interest monthly and then repay what you owe at the end of the set period of time (with money that you’ve saved outside of the agreement).
These types of mortgages are a bit different their above counterpart, because at the end of the loan you’ll need to have enough money to repay the whole debt at once. You can save up the needed money in any way that you wish, but you need to have it in full by the time you need to pay it. If you don’t, your house will almost certainly be used as collateral.
You can sometimes get lucky with these kinds of loans; because the value of your property may have increased so much that the extra value is enough to pay off the debt.
One of the big advantages is that your monthly repayments will be lower than with any other kind of mortgage, because you’re only paying the interest off each month.
Fixed rate mortgages
These kinds of loans are often popular with first time buyers because the interest rate stays the same for a set amount of time (which is typically 2 to 5 years, but it can also sometimes be 10 years). You’ll know exactly how much you’ll need to be paying each month and for how long, and it won’t change.
The only problem is that you’ll have a higher mortgage rate if other rates go down.
Variable rate mortgages
Every lender has a standard variable rate mortgage. And it’s pretty much their basic mortgage.
The interest rate increases and decreases as mortgage rates change. The interest rate that you pay on one of these kinds of mortgages can vary all the time – which is good if the price drops, but bad if the prices increase.