A Home Mortgage Loan – The Difference Between A Fixed Rate Mortgage And Variable Rate Mortgage
If you are looking to buy property some time soon, you will have to begin the arduous process of looking around for a good home mortgage loan. If this is completely new territory for you, then you should start doing some research as early as you can so that you will know what you need to be looking for and what best suits your requirements.
You will come across a lot of technical jargon that you should try and get to know. This will stand you in good stead when you are trying to find the best possible deals on the market. You will need to know the difference between an interest only mortgage and a repayment mortgage.
If you do
not understand the terminology then you will find it difficult to decide
whether something is a good deal or whether you will be paying over the
odds. Once you are confident with the
language used by mortgage companies and mortgage brokers this will naturally
help you to get the best deal possible.
There are basically 2 types of mortgages that are available. They are
- A fixed rate mortgage
- A variable rate mortgage
A Fixed Rate Mortgage
If you choose a fixed rate mortgage, then you will know exactly what your monthly mortgage payments will be for the duration of the deal. The interest rate is set for a particular period and your payments will be worked out and divided evenly over that time. Each month you pay the same amount. This is a good choice for people who like to know exactly what their outgoings will be each month as it makes it so much easier to create a budget and know where your money is going and when.
A Variable Rate Mortgage
You may find that this is more suitable for your situation. The deal usually means that when the bank of England changes its interest rates, banks will follow suit so the rate on your loan will be affected. The result is that your monthly payments could increase, which isn’t so great. The flip side is that if the bank’s interest rates get lower, then your mortage could also decrease so you will be paying less per month. As there is a little more risk attached when signing up for this sort of contract, you are likely to find much better deals when the economy is buoyant. However if you know that you are risk averse then it might not be the best option for you.
Once you start looking into what makes up a home mortgage loan and you know the basic difference between a fixed rate mortgage and a variable rate mortgage you will have to learn all about the difference between a repayment loan and an interest only repayment loan. Both types have their advantages and disadvantages and the one you decide to go for will be based on your current circumstances.
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