You are thinking of the next step in your adulting journey – buying a property. A mortgage is a vital thing you should know about before you take the big old purchase and get your own home. There is a variety of mortgages to learn about such as a fixed rate mortgage, adjustable rate mortgage, and split mortgage. Knowing these types of mortgages will help you make the right choice to make sure you save money when purchasing your own abode.
What is a mortgage?
A mortgage otherwise known as a home loan is a type of loan provided by a financial organisation to be able to live in the property that you are borrowing money in order to purchase. Usually, a home loan will last for 25-30 years that have consistent repayment amounts that occur every 2 weeks to a month that ensure you will be able to pay the entire loan off within this term. This loan uses your property as security therefore if you have to discontinue being able to pay off the loan, the lender will require you to have your property sold by another borrower to therefore settle the debt. This is the solution for most people who are aiming to purchase a home. Priva Mortgage is one of the top mortgage brokers to aid your home loan enquiries. Access the Priva Mortgage website in order to get in touch with one of their highly experienced team of mortgage brokers.
What are the best type of mortgages depending on your particular situation?
Fixed rate mortgage
A fixed rate mortgage typically has a term length of 15 up to 30 years. During that time, the interest rate and monthly payments stays constant. This loan would be chosen when you desire to live in your property for longer than 7 years and you like the consistency in having your principal and interest paid at a fixed rate. Another reason why people chose a fixed rate mortgage to pay for the home is if you consider that your expenditure and income will not change and you don’t want the option for oncoming monthly payments to fluctuate. For those who have a family, this may be the right solution to make sure everyone is supported. This is a stable option for homeowners who want to get their loans paid on time.
Adjustable rate mortgage
Adjustable rate mortgage usually has the same yearly range as a fixed rate mortgage. The difference is that the interest rate will fluctuate with your loan either increasing or reducing. The monthly payments will be higher at one point in time and lower at month. This loan is perfect if you aim to live in the home 5 years or less, are ok with the constant shifts in your monthly payments, you are relaxed with the potential of a payment rises in the future and believe your income will advance as time goes on. There is a variety of benefits in getting an adjustable-rate mortgage such as an offset account which your home loan is linked to your everyday bank account. By looking at all these considerations and with the help of a mortgage broker, you’ll be able to find a long that is most suited to your present finances and your future finances. If you would like a more flexible option, this is perfect for you.
Split mortgage
For those who like the stability with a fixed rate mortgage, and then would like the beneficial features of an offset account, split mortgage is the perfect solution. A split mortgage is half a fixed repayment and half variable repayment. They way this operates is the borrower will have two split loans that equate to the entire loan amount. For instance, you may borrow a total of 100,000 but have fixed amount of 70,000 and 30,000 with the adjustable amount. That way you get the best of both worlds if interest rates increase or decrease.
The main takeaway
You will never have to feel “home a-loan-e” with your incredulous mortgage knowledge. By knowing about the different types of mortgages such as fixed rate, adjustable rate, and split mortgage, you are well on your way to purchasing the home of your dreams.