Sniffing Out Discounted Mortgages

These days, mortgages provide the answer to our house-buying woes. These days, there are many kinds of mortgages that we may be interested in. Most commonly, we have a choice between fixed rate mortgages and adjustable rate mortgages. The former type of mortgage charges a fixed rate of interest that has to remain the same for the entire period of the loan. The latter, as the name suggests, charges an interest rate that fluctuates depending on the interest rates that are currently prevailing. Over the years, a majority of people have chosen to go along with the fixed rate mortgage type. Given that mortgages usually have long tenures, it is advisable to apply for a deal that charges a fixed interest rate. This makes it easier to plan one’s budget later on, and it also provides a sense of security to the borrower at times when interest rates seem about to rise.

This is not to say that mortgages with adjustable rates are necessarily to be avoided. If one is lucky, one can avail of significantly lower rates if the interest rates are relatively low. This is an advantage that is absent in the case of fixed rate mortgages. The latter guarantees that the interest rates will not rise. But it does not make any promise of increased savings in case the interest rates do drop. Thus, there is something of a gamble in both cases. Government policies that are put into effect once one has signed a deal generally have significant impacts on the amounts that one has to pay as installment.

At the time of selection of a fixed rate mortgage one should be aware that lenders are likely to fix rather high interest rates so that they can make enough profits from the mortgage deal. Thus, even though a borrower might actually prefer a fixed rate mortgage because the rate of interest will not rise, he may be losing out on savings that may be possible with a variable rate if the interest rates happen to fall. If government policies put lower rates into effect, a person with fixed rate mortgage would find that he is making unnecessarily large monthly repayments. Thus, it may make a lot of sense to find a discounted mortgage which offers adjustable rates of interest.

These days, most loan providers offer mortgages that are great bargains. Greater discounts are usually offered on the less popular adjustable rate mortgages. All that one has to do is be on the alert for the best deals possible.