If you are totally confused by mortgages and unsure how to work out which deal is the most suitable don’t worry, you’re not alone. However, it is important to understand that mortgage is just a loan with two special characteristics.

  • It’s designed to be paid back with interest over a long period, typically 25 years. That means whilst the interest rate can be low, as it is applied over a long period of time, you still pay a lot for it.
  • Unlike a bank loan or a credit card debt, a mortgage is what’s called ‘secured’. That means in return for lending you money, the bank uses the property as security for the mortgage. While ‘security’ may sound comforting, it’s the lender, not you, that gets the security. It means if you get into problems and can’t repay, it has the right to repossess your home and sell it to recover the money you borrowed.

Navigating through the plethora of deals on offer can seem bewildering, but it boils down to a series of consecutive choices – at each one write down your preferences, so when it comes to finding your mortgage you know what’s right for you. Broadly speaking there are two major types of mortgage deals which you can deal with.

Fixed Rate Mortgage

Fixed rate mortgage offers you pay interest rate for a certain period of time usually four or five years. Once the fixed rate period ends you will move onto a variable rate – at this point it is usually worth remortgaging onto a new deal.

Pros

The main advantages of a fixed rate mortgage is that you know exactly what your mortgage payments will be and you are protected from any increases in interest rates during the fixed term. Fixed rates therefore tend to be popular with those who need to budget carefully or who just prefer the peace of mind an unchangeable rate of interest gives.

Cons

You are usually tied into the mortgage throughout the fixed term and will be charged an ‘early redemption charge’ (ERC) if you redeem your mortgage during that time. It is for this reason that most borrowers tend not to fix their mortgage for longer than five years because so much can change – interest rates may plummet leaving you stuck on an incompetitive rate, or your circumstances may change meaning you need to get out of your mortgage deal

Variable Rate Mortgage

However under variable rate mortgage, the interest rate is influenced by external changes and market conditions.

Pros

The main advantage of a variable rate mortgage is that you should benefit from lower monthly repayments if interest rates fall.

Cons

But the main disadvantage of a variable rate mortgage is that your monthly repayments could also go up if interest rates increase.

Whether you’d prefer a fixed rate or are happy to take a gamble and go for a variable rate Avon Financial will allow you its services at every step. We have a team of specialized individuals to guide you at each step of your mortgage loan achievement.

Contact us today at :

info@avonfinancial.com
Ph:905-216-5563

 

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