Sniffing Out Discounted Mortgages

Posted by nick_niesen on October 29th, 2010

These days, mortgages provide the answer to our house-buying woes. These days, there are many kinds of mortgages that may be available to us. Most commonly, we have a choice between fixed rate mortgages and adjustable rate mortgages. The former type of mortgage charges a fixed rate of interest that will remain at a constant rate for the entire period of the loan. The latter, as the name suggests, charges an interest rate that fluctuates depending on the prevalent market rates of interest. Over the years, a majority of people have chosen to go along with the fixed rate mortgage type. Given that mortgages usually have long tenures, it is a good idea to try and secure a deal that charges a fixed interest rate. This makes it easier to plan one's budget later on, and it also provides a sense of security to the borrower at times when interest rates seem about to rise.

This is not to say that mortgages with adjustable rates can never be a good bet. If one is lucky, one can avail of significantly lower rates at the time when the interest rates are low. This is an advantage that is absent in the case of fixed rate mortgages. The latter guarantees that the interest rates will not rise. But it does not suggest that there will be greater savings in case the interest rates do drop. Thus, there is the risk element in both situations. Government policies that are put into effect once one has signed a deal generally have significant impacts on the amounts that one ends up paying as installment.

At the time of selecting a fixed rate mortgage one should be aware that lenders are likely to fix rather high interest rates so that they can make the profits that they are hoping to. Thus, even though a borrower would prefer to get a fixed rate mortgage because the rate of interest will not rise, he may be losing out on savings that may be possible with a variable rate if the interest rates happen to fall. If government policies put lower rates into effect, a person with fixed rate mortgage would see that he is making unnecessarily high monthly repayments. Thus, it may be advisable to go in for a discounted mortgage which offers adjustable rates of interest.

These days, most loan providers offer mortgages with a lot of discounts. Greater discounts are usually offered on the less popular adjustable rate mortgages. The only thing that we have to do is to remain on the alert and find the best bargains.

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