Types of Mortgage Interest Rate Deals and How They Work
Mortgages won't work without interest rates. These rates are earnings for your lenders. Before going to the types of interest rate deals, get some background on the ways by which you can pay your mortgage. There are two. The first one is known as the repayment method. In this type, you should pay for the loan on a monthly basis until such time that the entire loan proceeds and interests have been paid for. The second option is called the interest only method. In this type, you only make monthly amortisations for the interest. The entire loan proceeds should be paid via a savings or investment account. Mortgage interest rate deals Having known about the repayment methods, you might as well want to learn about interest rate deals. Here are some types: 1. Standard variable. This rate follows the interest rate set by your lender. In UK, this may change depending on the rate of the Bank of England. 2. Discounted. This rate is where you will pay a lower rate than what is offered by your lender. In time, you will also pay the standard rate. 3. Fixed. This is set for a specific period so that you know how much you will repay for your loan on a monthly basis. Once the set period ends, you are obliged to pay for the standard rate. 4. Tracker. In UK, this is based on a rate given by the Bank of England or other financial offices. This will change with the trend in the industry. 5. Capped. This is a rate with a ceiling. The ceiling is used in order for you not to exceed payments over a set amount. Knowing about these rates will allow you to be informed with your options before getting a mortgage. Ask your mortgage brokers about these rates.