Interest for mortgage
Introduction
A mortgage is a debt loan that is secured by a collateral of real estate property. The borrower is expected to pay back the amount borrowed failure to which results to the real estate being taken away for him/her. There are different types of mortgages that have their own advantages and disadvantages and it is upon the borrower to determine carefully the type that is suitable for them. The type that an individual chooses determines greatly the amount of mortgage interest rates expected from him/her. For mortgages to be fair and affordable for the borrower, adequate research and consultation is required.
Factors that affect mortgage interest rates
The mortgage rate that an individual is offered depends on the deposit made, amount of loan requested and payment method. There are other factors that affect the mortgage rates and they include;
- Base rate
- The current average interest rates that banks are charging when they lend each other money.
- The number of available repossessions
- The rate of unemployment.
However, there are different mortgage types and each charge different rates. The most common types of mortgage loans are;
- Fixed rate loans: in fixed rate for mortgage, the rate to be paid is fixed for a certain period of time. The borrower is a peace and knows the exact rates to pay over a certain period of time. But this type of mortgage loan has higher interest rates and for mortgage rates to be low your fixed period should be short.
- Standard variable mortgages: The interest rates change over time according to the lender's standard rates for mortgage. Meaning, you are not certain of the rates you are meant to pay since the interest rates and repayments for mortgage change as the economy changes.
- Offset mortgages: Offset mortgage combines an individuals savings and mortgage account. Meaning that the money in your savings account can be termed as an overpayment for mortgages. It can sometimes have high interest rates but they are cancelled by the savings made overtime.
Features
Most banks charge mortgage rates according to the risk involved and the amount requested for. The bank analyses the size and purpose for mortgage loan. Investment properties and large principal balances attract higher mortgage interest rates. The bank or mortgage lender assumes that an investor will abandon a failing project and fail to pay the mortgage as agreed or the investor may be determined to maintain his property to avoid closure or evictions hence work hard for mortgage payment.
Tips and comments
The following are tips on how to reduce rates for mortgage.
- Consult a mortgage specialist: a good and experienced mortgage specialist will be in a position to answer all your questions and also give the best advice that caters for your needs.
- Increase your payment frequency: any additional payments that you make always reduce the interest rates for mortgage with time. For mortgage balance to reduce, it means that less is deducted as interest payment and more is deducted as principal payment.
- Protect the mortgage: purchase a mortgage insurance that will protect your lender. This will make your lender feel secure hence reduce your mortgage rates by some reasonable amount.
