The word mortgage is enough to strike fear into the heart of anyone. There is so much to consider. There are a lot of options to choose from. In short, it can be a difficult journey into understanding the complexities of the mortgage.
But, it doesn’t have to be a difficult or arduous process. When you are faced with your mortgage options, the best thing to do is to look at the different types and see which one fits your needs. If you currently have a mortgage and you are looking to switch, or your fixed term is coming to an end, there are some excellent options that you can explore.
Fixed Term Mortgage
Many people are comfortable with a fixed rate mortgage. You get peace of mind that you pay a certain amount every month over the course of the term time. This is usually done over a three-year period. Your rate stays the same irrespective of the interest rates. You can opt for a longer fixed term in some circumstances. So, if you want a five-year deal, you need to speak to your mortgage provider. This can be beneficial for people who like to manage their money in more fixed way.
A tracker mortgage is akin to a variable rate mortgage. But, your mortgage is reflected on the amount of interest that is being tracked by the bank. So, instead of following a variable, your mortgage provider will track the base rate of interest.
If you are retired and you are looking at ways to free up equity in your property, a reverse mortgage could be beneficial for you. You can take out a loan against the equity and free up spends from your mortgage. This is paid back upon sale of the home. You are required to be over 55 to qualify for this mortgage. Check out this reverse mortgage guide for more details. The reverse part of the mortgage is that you don’t pay the mortgage company. Instead, they pay you a fixed sum on a monthly basis based on the equity that exists within your property. Imagine a world where you are paid by your mortgage! This can be an excellent way to tap into underutilized resources and frees up a lot of cash in retirement.
Variable Rate Mortgage
A variable rate mortgage is often used by those who have just come out of a fixed term agreement with their mortgage provider. Unlike a tracker mortgage, your mortgage provider will ensure that there is a price set that you pay against. This is done in the form of a pre-agreed percentage rate. So, if interest does go up, your mortgage provider may not put your rate up. In essence, you are leaving the bank or mortgage provider to set the rate. However, this will never go above the inflation base rate. This can be an excellent way to beat interest in some cases. But, you don’t have the peace of mind that your mortgage will be the same amount every month.