Several types of mortgages are available on the market. Each of them has a different interest rate, flexibility, and fees. Choosing a mortgage is never easy. Choosing the right one that can benefit you the most is very important. The interest rate of these mortgages can be fixed, floating, or both. Each mortgage is made up of different components and payment structures. Before you get confused, let us take a closer look at the different types of mortgages you could use.
A fixed-rate mortgage is a mortgage for two to four years and has a fixed interest rate. It refers to a home, and the entire term of the loan has a fixed interest rate that would not change in the long or short term. There may be slight premium security and they are popular with consumers because of their affordability. The terms typically range anywhere from 10 to 30 years for fixed-rate mortgages. Also, the interest rate does not fluctuate under any market conditions.
Standard Variable Mortgage
An SVR mortgage (Standard Variable Rate) is simply a mortgage interest rate. It’s the most common type of mortgage that most people usually opt for. An SVR refers to what is transferred to you upon the end of a tracker, discount, or fixed deal. Some lenders will let you take out a mortgage on their standard variable rates, and it’s a more expensive option for you to choose. An SVR is higher compared to the rates of other mortgage types.
A capped mortgage is like a fixed-rate mortgage, but it has a small difference. This type of mortgage has an interest cap, which means your payments can’t rise above the interest rate ceiling. A capped rate mortgage is normally for an introductory period, and only a handful are available in the market.
Income Property Mortgage
A buyer would seek an income property mortgage when considering buying a commercial or residential property. An income property mortgage is available to anyone, especially businessmen and investors interested in purchasing residential properties. There are many requirements and it’s typically much harder to qualify than for other mortgages on the market available.
Similar to an investment mortgage, an endowment mortgage is a type of mortgage in which an individual only pays the mortgage interest each month. The borrower only pays the monthly interest instead of the principal payment. The borrower also makes a regular investment into the endowment. The endowment will mature if the mortgage also matures. Primarily, a borrower uses the resources from the endowment to pay the mortgage principal.
A reverse mortgage is made for seniors. The funds you can receive depends on the value of your house. This type of mortgage is secured by commercial and residential property. The borrower can receive a fund’s a lump sum, and it has a fixed monthly payment. Fundamentally, a reverse mortgage allows the borrower to convert their home’s value into cash income with no monthly mortgage payments.
Adverse Credit Mortgage
Anyone seeking a mortgage can avail adverse credit mortgage even though they have a bad credit history. Not all lenders offer this type of mortgage because it’s risky. An adverse credit mortgage is a type of mortgage available to people who have negative payment information or history on their credit file. Usually, lenders who offer this kind of mortgage are focusing on the specialist mortgage market.
As the name implies, this type of mortgage is a mortgage that involves multiple parties rather than an individual. Each individual on the party shares the payment and interest rate of the mortgage. Anyone in the party shares legal responsibility to pay the loan.
What You Need to Know About Mortgages
Before deciding to choose the type of mortgage, consider doing research that would help you a lot. A mortgage is divided into three parts, down payment, monthly payment, and fees. The down payment is the upfront amount to secure the mortgage. The monthly payment is the amount you need to pay monthly. This may include the interest and the loan principal payment. Lastly, fees are the various cost that you need to pay upfront to secure the loan.