When you enter the market to get a home loan or mortgage, you are presented with a number of options to choose from, each with their own unique advantages and disadvantages. Some may have low interest rates, some may have greater repayment flexibility, while others can be taken for a particular period. If you are looking at getting a mortgage in San Diego for instance, I would always suggest using something like a san diego mortgage calculator to see what your potential monthly repayments would be and how to get the best deal possible.
That way your are able to select a mortgage plan that suits you, for which you are eligible, and make sure it meets your requirements and benefits you the most. Here are different mortgages types you should be aware of.
1. Tracker Mortgage
One of the types of variable rate mortgage is Tracker Mortgage. The Bank of England sets the interest rate of this mortgage. The deal on this loan lasts for the minimum of one year and maximum of the total life of the loan. You will be transferred to the lender’s SVR (standard variable rate) as soon as your tracker deal ends. They also have higher interest rates.
2. Closed Mortgage
According to the agreement, you cannot refinance, prepay, or re-consult closed mortgage until and unless it does not mature. However, all of this can only happen if the terms of the agreement were amended before signing.
3. Pension Mortgage
If you already have a personal retirement savings account (PRSA) or personal pension plan, or you are a proprietary director, who has occupational pension scheme, you are eligible to apply for pension mortgage. Pension mortgage will get you lesser money as compared to the annuity mortgage. The mortgage is paid by cashing the personal pension policy. You will be paying the interest on the amount you borrowed and monthly payments until then. There is also a tax relief on the pension payments, so make sure to discuss the paying options with your lenders.
With time, the value of pension policy will increase, and you will be able to clear your loan by the time you retire. This policy will also get you the pension income. There will always be a chance that you might not be able to pay off the original loan amount. In such a situation, you will get smaller amount of income when you retire.
4. Fixed Rate Mortgage
The best part about a fixed rate mortgage is that the interest rate will remain constant —whether it is for a year, 5 years, or even 10 years. Once the rate is fixed, you will know the cost of your mortgage, and you will be able to set a date by which you will return the entire amount.
5. Discount Mortgage
The term discount mortgage is self-explanatory. You will be getting discount off the standard variable rate (SVR) of the lender. This is normally for a specific period of time, which ranges from two to three years. However, it does not necessarily mean that the interest rate will also be lower. Initially, the cost will be low so you will be making affordable monthly repayments, and with the cut in SVR, the monthly amount will reduce even more.
Choose the mortgage wisely by comparing them with each other and your needs and requirements.