A property is likely to be the single most expensive item you will ever buy. For this reason, getting a mortgage can seem daunting. The amount of money you will borrow may seem intimidating to start with. Added to that, the vast array of mortgage products on the market, all with different mortgage rates, and the amount of lenders who present tempting offers, can leave you confused, stressed, and unsure of where to even start looking.

It is important, before you get a mortgage or a remortgage, to compare mortgage rates. The mortgage rate is the amount of interest you pay on how much you borrow, and can make a significant difference to how much you eventually pay back over the years. For this reason, finding a mortgage rate that best suits your personal circumstances is the best way to save money in the long term.

Mortgages are normally referred to by the type of rate you pay on them. So, the first step to making the right choice about which mortgage product to get is understanding the terminology used to describe mortgages, and to find out just what exactly each type of mortgage rate entails. Below is a short guide to help you work out which mortgage rate is best for you.

Different types of mortgages to consider

The most popular type of mortgage is a fixed rate product. This is where the amount you pay is fixed for a set period of time, which is normally between two and five years. The fixed rate mortgage could be the best option for anyone concerned that they will not be able to afford to pay their mortgage if rates suddenly increase, and so offers stability and security.

If you have a fixed rate mortgage, it is normally wise to compare your mortgage rates to other deals once the fixed rate period is over, to ensure that you are not paying more than you would have to elsewhere. If you are, you have the option of moving your mortgage to another lender.

Discounted rate mortgages can work out well for some borrowers. Essentially, the rate is set at a discount, for example, at 1%, compared to the lenders SVR (standard variable rate). This means that if the base rate increases, so will the borrower’s mortgage rate, and so with this kind of mortgage, you need to be prepared if an increase occurs.

A tracker rate mortgage can be beneficial if the base rate is low. Tracker mortgages are variable products, which are directly linked to the base interest rate, and so your mortgage rate may move up and down as the base rate increases or decreases.

The final and most rate kind of mortgage rate comes with a capped mortgage deal. These are less popular than other kinds of mortgage, as they tend to be more expensive in other areas than other kinds of mortgage product. With these, the interest rate may vary, but it is guaranteed not to increase above a specified amount. This can give the borrower some security, as with fixed rate mortgages.

This entry was posted on Monday, November 24th, 2008 at 2:34 pm and is filed under Mortgage Rates. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.