Mortgage Loans - choose the best option
Mortgage loans are the number one financing tool for people who want to become homeowners. Obtaining a mortgage financing on very good terms from all points of view (interest charges, repayment schedule, etc) is not easy. However, the market is abounding in mortgage offers, and lenders are literally competing against each other. Consequently, you do have a lot of options to choose from, and as long as you stay informed and know what you want, you will definitely be able to find the product that best suits your needs.
Banks and credit unions are the ones financing for your acquisition, but you certainly have to meet some criteria in order to get eligible for a mortgage:
Banks and credit unions are the ones financing for your acquisition, but you certainly have to meet some criteria in order to get eligible for a mortgage:
- A good credit rating – without it, it is almost impossible to find mortgage financing. With a bad credit rating, you automatically become a great deal of risk for the lender, thus you might be able to obtain only mortgage products which are overwhelmingly expensive (very high interest rates, extra charges and also expensive late payment fees)
- A stable source of income – Being a self employed definitely raises questions for mortgage lenders, because self-employed individuals cannot make proof of a stable source of income.
Here are the main types of mortgages you may choose from (the most popular):
- Short term fixed rate mortgages – for a period of up to 5 years of your total mortgage repayments, you will be paying fixed rates.
- Long term fixed rate mortgages – paying fixed rates for a period much longer than 5 years. Long term fixed rate mortgages come with very expensive early repayment charges, however.
- Discount rate mortgages – for the first quarter of the mortgage (say 5 years), the borrower receives a discount from the variable interest rate (2% to 4% discount).
- Capped rate mortgages – there is set a maximum value for the interest rates payable, and this cannot be exceeded. The advantage is that if interest rates fall on the market, you will pay less, but if they grow uncontrollably you will pay only as much as agreed (“cap”)
- Cash-back mortgages- the lender offers in advance a cash amount, which will generally be added to the total mortgage value. This amount can be regarded as a starting point, because you can freely use the money for home improvements for example (furnishing, other investments).
