There can be a lot of confusion when it comes to choosing the best mortgage loan. There are many variables that need to be taken into account when deciding what type of mortgage you should choose.
It depends in part on whether you expect rising or falling interest rate, as well as other financial factors. For example, a bridging loan can be beneficial if you are purchasing a property to renovate, especially if it is not in fundable condition.
A mortgage expert is always a good resource when it comes to mortgage advice. Here we take a look at different loan options so you can decide which one is best for your needs.
Fixed rate mortgages
Most people go for fixed rate mortgages. Unlike a variable interest rate mortgage, a fixed rate mortgage has a fixed interest rate for a fixed number of years. Mortgages of this type are also known as sticky loans. You won’t have to worry about fluctuating payments with this type of mortgage.
During the fixed term of the loan, the interest rate remains the same. You won’t see any change in interest rates during this time, so your rate will stay the same. Fixed rate mortgages are available from 3 months to 5 years.
Usually, a lender will be able to offer a fixed rate mortgage to a borrower if they have a large enough deposit (See more on mortgages.co.nz).
Variable rate mortgages
Variable rate mortgages have interest rates that can change monthly or even weekly. Changing interest rates every year and even every few years makes these loans more expensive than a fixed rate mortgage.
Keep in mind that if interest rates go up, you can expect your interest rate to increase. You can’t predict when interest rates will go up and down, and your mortgage rate can go up quite sharply.
In times of low interest rates, your rates may go down, but in times of high interest rates, they may go up. You may need to consider paying a mortgage at a higher interest rate if your interest rate goes up.
When you expect interest rates to rise, it is better to pay a higher rate now rather than later when interest rates are lower.
Interest-only mortgages
An interest-only mortgage is a mortgage on which you pay no interest for the first year or two. Once this period has elapsed, you will have to pay loan fees which are interest.
When considering an interest-only mortgage, you need to understand that your repayments will increase when you start making payments. In the second year of your loan, you will have to pay interest, which is usually a fixed fee.
If you think interest rates will go up or down, this may be a good option. The higher the interest rates, the higher your mortgage payments will be, and the lower they will be, the lower your mortgage payments will be.
Bridge loans
The purpose of the bridging loan is to finance the purchase of real estate. You can use this loan to pay the difference between the purchase price of your home and the mortgage payment.
Bridge loans are short-term loans with very flexible terms that can help you move up the real estate ladder. Typically, bridging loans require a large deposit, typically at least 10% of the property’s selling price.
You don’t have to send this money all at once – it can be spread over a period of time. Bridge loans do not require monthly repayments after you make that initial 10% deposit. Borrowers who need a bridging loan simply want to bridge the gap between selling one property and buying another.
Typically, people take out bridge mortgages when they are looking for a home that they really want to buy, but at the end of the day, they can’t raise the funds to get the home in one. one time. The idea is that with a bridging loan, you can buy your dream home without having to juggle too much financially.
Conclusion
One of the most exciting times in life is when you buy your first home. It represents growth, prosperity and stability. You need to make the best decision possible when buying a home. This includes making payment arrangements that are flexible and economical. Make sure you consider several types of mortgages before choosing one.
You need to carefully consider your financial situation and your goals before choosing the right type of mortgage. As we make this critical life investment decision, we hope this guide is a good place to start.
Interesting related article: “What is a Fixed Rate Mortgage?” “