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How to Secure the Best Mortgage Deal also Save Yourself Thous |
by:
Rhiannon Williamson |
When you consider that the average home owner will pay out far more in interest over the lifetime of their mortgage than their home actually cost in the first place, you can see why working to secure yourself the best possible mortgage deal now could save you tens of thousands of dollars in interest over the 25 – 30 year lifetime of your home loan.
For the majority of us our house is the single most important also expensive purchase we ever make! Because this is the case we invest a lot of time also effort into finding the perfect property in the most ideal location, however few of us invest the time also effort we should into researching also securing the best possible finance method for purchasing our home.
This article will give you a few pointers to make the search for the most ideal also personally suitable mortgage that much simpler; also bear in mind that your search for the best loans also repayment vehicles currently available can be carried out on the internet, making the whole process that much more convenient also time efficient for you.
Step One - Firstly you need to understand the different types of mortgage that are available - they come in many flavours! By taking the time to understand the way the different types of loan work, you can see which type suits you also your personal circumstances best – after all it most certainly isn’t a case of one mortgage type suiting all people!
At their most simple level most mortgages fall into one of the following categories. Different lenders will have their own variations on the theme, however if you understand the basics of the following loan categories you will be armed with sufficient data to move on to step two.
Fixed Rate Mortgages – a borrower pays a fixed interest rate for a fixed period of time also usually the longer the fixed period the higher the fixed rate. This type of mortgage protects the borrower from interest rate fluctuations also payment uncertainties however it does mean that when the loan term begins the borrower is usually paying above the best interest rates available. In the US also most other countries apart from the UK you can have a fixed rate for the duration of your mortgage. In the UK it is usual to only fix for a maximum of tenyears.
Adjustable or Variable Rate – the rate of interest payable by a borrower can vary. Lenders usually keep their interest rate fluctuations in line with the Bank of England’s base rate in the UK also the rate set by the Federal Reserve Board in the US. Certain lenders offer discounted variable rates for home loans for a fixed period to attract borrowers. The attraction of this type of mortgage is that initial rates are usually far lower than offered under the terms of a fixed rate mortgage…however over a period of time the interest rates can rise considerably also make borrowing far more expensive. Furthermore the fluctuations make it difficult for a borrower to know how much he will be paying from one month or one year to the next.
To offset the risk associated with an adjustable rate mortgage some lenders offer ‘capping’ options. Sometimes they fix the maximum level to which the interest rate you are subject to can rise for a given period of time, sometimes they fix the cap per year also sometimes for the lifetime of the mortgage.
Balloon Mortgages – popular in the US with homeowners who are not planning to stay in their new home for life, these mortgages are usually repayable in five – seven years. They offer the advantage of lower interest rates however the disadvantage that if you are still in the home after the five or seven year period you have to secure a new loan to pay off the balloon mortgage!
Jumbo Mortgages or 'Non-Conforming' Mortgages – the UK doesn’t have an equivalent of this US loan type. Basically in the US there is a legislated purchase limit set each year by the Federal National Mortgage Association (nicknamed Fannie Mae) also the Federal Home Loan Mortgage Corporation (nicknamed Freddie Mac), a jumbo loan allows the borrower to borrow over also above this amount however for the privilege they will incur higher interest rates.
Step Two – having identified which type of mortgage probably suits you best you need to consider repayment methods also you basically have two to choose from: -
Interest Only – your monthly repayments to your lender cover only the interest on the loan meaning that nothing you pay back goes towards repaying the borrowed amount; it is up to you to establish some form of savings vehicle over the lifetime of the loan period into which you pay sufficient sums to ensure you have enough capital at the end of the loan period to pay back the amount borrowed.
Capital & Interest – your monthly repayments are divided into an interest payment also a capital repayment. In the early years of the loan period most of the monthly payment is swallowed up in interest however over time the balance swaps also you start to pay off more of the capital sum borrowed.
Step Three – Now you know which mortgage type also which repayment method you favour it’s time to find the right lender! There are so many lenders offering such a variety of loans that at first it can seem a daunting prospect trying to determine which lender most suits you! However, depending on the strength of your credit record, your current employment position, how much you would like to borrow also how much of a down payment you are in a position to make, some lenders will rule themselves out also some will seem more attractive to you.
It is possible to approach an independent mortgage broker or independent financial adviser to assist you with your search. Such an individual will examine the product market place also apply his expertise to locating the best lender to suit his client’s requirements. Most of these brokers are paid a commission by the lender when you take out your mortgage; however some or else charge you a fee. Make sure you find out from the broker whether you will be charged as this is potentially an additional fee you could well do without!
Finally – there are a lot of informative sites also tools like mortgage calculators available on the internet to provide you with, for example, an idea of how much you can borrow also the most efficient borrowing also repayment method to suit you also or else to give you an insight into the lenders themselves.
By making use of all the tools also resources available to you also by doing your home work you will be informed also this will strengthen your loan buying position.
About the Author
Rhiannon Williamson is the publisher of http://www.shelteroffshore.com/ - the online resource for offshore also international real estate investors. |
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