Four Different Types Of Mortgages

There are many different types of mortgages, and each one has its own specific benefits. Not every person in this world has a complete understanding of complicated subjects such as mortgages, so it can be helpful to have a better idea of what kinds of mortgages are available. Following are five types of mortgages that may suit your individual needs.

1.Fixed Rate Mortgages
These types of mortgages are very popular, especially among those of you who are looking for an increased amount of control over your personal finances. If you’re checking out mortgages and your finances are already stretched to their limit, then you may want to consider a fixed rate mortgage.

With this type of mortgage, you can rest assured knowing that your repayment amount won’t change for a period of time that is set from the beginning of your relationship with the mortgage company. This time period could be anywhere from six months to five years, depending upon your situation. This means that you are protected from interest rate rises during this fixed time period.

2.Variable Rate Mortgages
This type of mortgage has a fluctuating APR (annual percentage rating), which is contrary to that of a fixed rate mortgage. This APR follows a specific bank’s base rate and is usually set one to two per cent higher than that bank’s base rate. This means that if the bank’s base rate changes, so does your APR.

3.Discount Rate Mortgages
Many lenders offer this type of mortgage to help to attract new business. Discount rate mortgages have an introductory low rate for a set period of time, usually lasting between six months and five years. After this time has passed, you will revert to your lender’s standard variable rate.

Many of those who take advantage of discount rate mortgages switch to variable rate mortgages once the discount period is over.

4.Capped Rate Mortgages
This type of mortgage has its interest rate “capped” at a maximum interest rate for a designated period of time, typically between six months and five years. Some opt to have this capping occur for the duration of the mortgage. This lets you take advantage of your lender’s standard variable rate dropping, if that occurs. This option also protects you so that there is a maximum rate you will have to pay, even if your lender’s standard variable rate increases.

Before you consider getting a mortgage, first do your research and decide what type of mortgage is right for you.