Mortgage Loans
By Ethan Sansbury
While the terminology and language of the mortgage industry is often confusing, especially to those first timers, it doesn”t have to be overwhelming. If you are in the market for a new mortgage you”ve likely been bombarded with terms and phrases that have you wondering if you need to hire an independent third party just to get through the process. Rest assured, it does not need to be a nightmare and with following a few simple guidelines, you will be ready and secure with your decision in securing a loan. Basically, there are four major types of mortgages that are offered to the borrower. There are variations to each under different names, however, which is where confusion often comes in.
The Fixed Rate Mortgage Loan
The fixed rate mortgages are a set interest rate for a fixed amount of time. The fixed rate applies typically between one to five years, although the fixed rate mortgage can be longer. This may confuse you at first thought, as people tend to typically think of the 30 year fixed mortgage rate. However the loan has a fixed time period and when that has run out, you will begin paying the interest at the Standard Variable Rate.
Discounted Rate
With the discounted rate mortgage the conditions of the mortgage are that the Standard Variable Rate of the mortgage lender is temporarily reduced in price for a set period of time. The typical time is between one and five years. Once the time expires the borrower will begin to pay the lender”s Standard Variable Rate of interest.
Capped Rate
The capped interest rate home loan mirrors the mortgage lender”s Standard Variable Rate. However, there is a point above which guarantees that you will never pay a higher rate of interest than what is stipulated. This is considered the “cap” and is common among introductory mortgage or remortgages deals that last between one to five years.
Flexible Mortgage
The flexible mortgage loan allows the borrower to make payments, either over payments or underpayments without penalties to the borrower. This is a very good loan for those who income has increased or has additional cash since you can apply it to pay down your loan without penalties. The flexible mortgage normally has interest calculated daily instead of annually, which means when you make an overpayment the quantity of interest in which you pay is immediately affected. When done on a regular basis it is possible to reduce the amount of the mortgage by years.
Tracker Mortgage
With this loan, the interest rate follows the Bank of England base rate and the mortgage lenders set rate. The lender typically sets a rate higher than the England base rate. For instance, if the Bank of England base rate is 3.5% the lender may add an additional one to two percent. These tracker mortgages the variable can go up or down.
Each of these loans has variations, however, with any loan read the terms thoroughly and ensure that you are not missing hidden costs.
About The Author
Ethan Sansbury writes for Schuylkill Mortgage http://www.schuylkillmortgage.com/, a mortgage brokerage that services all of PA. For more details visit their website http://www.schuylkillmortgage.com/ to find out how they can help you attain a mortgage in Pennsylvania.
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