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Mortgage Guide for Beginners

Aug 17, 2007
If you already have a mortgage than you surely know the basic and the "tricks" for obtaining a great deal. If it's your first one though you should back up with some information so that you are able to "sense" the deals that are good for you. Of course in any case professional advice should be taken before signing any mortgage.

First of all make sure you know the basic terminology. A mortgage is a loan you obtain to pay for your home. The interest rate is the amount that the bank charges you to pay for using its money. The term of the mortgage is the time limit you have to repay the loan. Usually it is between 25-30 years since the amount of money needed to buy a home is big. Of course there are much more things to learn about the terminology used however these are the very basic things that you should know.

The next thing you should know is what the interest rate types are. Generally any mortgage differs because of the interest rate type and it can influence the payments you will have to make in order to repay the loan. There are variable rate mortgages, fixed rate mortgages, discount rate mortgages, capped rate mortgages. The variable rate changes according the Standard Interest Rate. As the Standard Interest Rate can increase or decrease so will do your monthly repayments. Of course you will benefit if the rate goes down, but your monthly payments may jump rapidly if it goes up. The fixed rate mortgages benefit from a fixed rate for a specific period of time. Afterwards the rate is calculated according lenders standard variable rate. The discount rate mortgages offer a discount of the lender's standard interest rate. The discount is valid for a period of time and once it's over the interest rate goes back to the lender's standard interest rate. A capped rate means that the interest rate will not increase over the capped rate for a fixed period of time. It's one of the best interest rate schemes but you should be careful as usually lenders offering capped rate mortgages have higher additional fees and charges.

The last thing to know is what types of mortgages are available. Obviously there will be a lot of mortgage products offered by the different lenders but in general there are two main types of mortgages: repayment mortgage and interest only mortgage. If you have a repayment mortgage, you will have to pay part of the amount borrowed and part of the interest. On the other hand if you have an interest only mortgage you will be paying the interest to the lender but without reducing any of the capital borrowed. Both types have advantages and disadvantages so you should seek professional advice which one is best for you considering your personal circumstances.

The last thing in our list but definitely not the last thing to consider is what type of lender you should choose. Unfortunately the loan officers you will contact will make beefy offers and at a first glance it will seem you have found the best lender. Don't forget though that this is the loan officer job so always make separate research about the lenders you have contacted. Each lender has strengths and weaknesses and you will have to asses them.
About the Author
Keith Londrie II is the Webmaster of http://mortgageinfoproducts.coffee-info.info A website that specializes in providing information on mortgage infoproducts that you can research on the internet. Please Visit http://mortgageinfoproducts.coffee-info.info Today!
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