The Various Types of Mortgages

There are a number of different types of mortgages that you can choose from when buying a property. The type of mortgage that fits you will depend on the situation you are in. Your financial stability as well as your ability to pay off your mortgage will be considered. When you do approach a lender, it is important to have someone with you, who is knowledgeable about borrowing and its terms. Below are some of the most popular mortgage types available to choose from.

1.      Fixed Rate Mortgage: This is the most common type of mortgage option many buyers choose. With this type of option, you are agreeing on the condition that states that the rate will be fixed for a certain amount of time. The duration of the term will be discussed with the lender, and the rate is locked in for that duration. Opting for this type of mortgage is great, especially when the mortgage rate increases after your purchase. The only disadvantage is that, if the rates drop, you will not be able to benefit from the change. Regardless of whether there is a positive or negative change, a fixed rate mortgage will ensure that you don’t spend more than you have to.

2.      Standard Variable Rate Mortgage: This type of mortgage is the most basic type available on the market. The rate is not fixed like in the previous option, because it varies. If the base mortgage rate changes, the rate on your mortgage will ultimately change. This is one option many people don’t choose to go with, because higher rates could cause an increase in mortgage payments. With the way the current economy is moving, it is extremely difficult to predict exactly what will happen in terms of financing and rates.

3.      Discounted Mortgage Rates: With this sort of option, you will have the ability to get a lower rate on your standard variable rate mortgage. This option gives you the chance to get a rate discount on the existing base rate. If the base rate decreases, you will be saving even more. However, if it increases, you would need to pay more than usual, but not as much as you would. With the nature of the standard variable rate mortgage plan, most people try to avoid it.

4.      Fast-Track Mortgage: Not everyone is eligible to qualify for this type of mortgage, as your credit rating plays a large role with this option. When a buyer is in a rush to get approved for a loan, the lender will offer this mortgage solution, only if the buyer’s credit history is above average. You do not need to show any proof of income or such, as the lender bases most of the qualifying factors in the down payment and savings you hold. The truth is that the lender will often ask your agent will be the one checking the paystubs making sure that your income is legit. However, keep in mind that lenders will randomly select individuals to show proof of income.

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