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What Are the Different Type Of Mortgages Out There

While choosing a mortgage, don’t just emphasis on the interest rate & fees you will be charged. Also you need to take into account what sort of mortgage you wish. Read this post to know the pros & cons of different types of mortgages.

There’re 2 main kinds of mortgages:

• Fixed rate: the interest you are charged remains the same for many years, usually between 2-5 years.• Variable rate: The interest you pay can change.

Fixed rate mortgages:

• The interest rate you pay will remain the same all through the time span of the deal irrespective of what occurs to interest rates.• You will see them endorsed as ‘2-year fix’ or ‘5-tear fix’, for instance, alongside the interest rate charged for that time span.

Pros:

• Gives you the peace of mind that your monthly payments will remain the same, helping you to budget.

Cons:

• Fixed rate deals are generally higher compared to the variable rate mortgages• You won’t benefit, if interest rates fall.

Variable rate mortgages:

The interest rate can change at any time with variable rate mortgages. Ensure you’ve some savings set aside so that you can pay for an increase in your payment in the event rates rise.

Variable rate mortgages avail in different forms:

Standard variable rate:

This is the usual interest rate your mortgage lender charges home buyers and it’ll last as long as your mortgage or until you take another mortgage deal.

Pros:

• Freedom – you can overpay or leave at any time.• Cons – your rate can be changed at any time during the loan.

Discount mortgages:

This is a discount off the lender’s standard variable rate and is only applicable for a particular time span, usually for 2 or 3 years.

Pros:

• Cost – the rate starts off cheaper which will keep monthly repayments lower.

Cons:

• Budgeting – the lender is free to increase its SVR at any time.

Capped rate mortgages:

Your rate moves in line usually with the lender’s Standard Variable Rate. But the cap entails the rate cannot rise above a particular level.

Pros:

• Surety – Your rate won’t increase above a specific level. But ensure you could pay for repayments if it increases to the level of the cap.

Cons:

• The cap tends to be set very high.• The rate is usually higher in comparison to other variable & fixed rates.

If you are looking for best low rate mortgage loans in California, then look no further! Call All California Lending today for a no-obligation mortgage loan in California. If you have any mortgage related questions, feel free to reach us on (877) 462-3422.