Taking a mortgage out on a house means that the property is placed under the control of the financial institution that lends the monetary resources to the buyer to purchase the house. This is done mostly due to the reason that the person is not able to pay the full price of the house due to financial constraints. It is also used as a tax saving tool by many. Once the mortgage is approved the policy holder has to pay back the bank or insurance company on timely periods s stipulated in the mortgage plan along with the interest. There are different types of interest rates that you can select based on your financial condition and mortgage plan.
A variable mortgage plan has a variable interest that changes over time according to the interest rates that exist during that period. This does not mean that the interest rate will fluctuate every day. There is a certain period for which the interest rate remains constant and then changes after the period is completed. If the interest rate is lower at a certain point of time, this can prove to be a highly beneficial mortgage plan. Although, there is an amount of risk attached to it since the rate can also rise exponentially.
The fixed mortgage rate as the name suggests makes use of a fixed rate of interest that does not change over the time and is not dependent on the market interest rates. Any ups and downs in the interest rates in the future will not affect the fixed rate mortgage. This is useful for people who do not want to take a risk and are confident of paying the loan amount back following the same rate of interest for the entire duration.
The interest only rate mortgage is beneficial for those looking to pay lower monthly installments at the start of the policy tenure. This mortgage plan only requires you to pay the interest on the mortgage for a fixed period of time. The rest of the amount should be paid entirely after the fixed period is over. This is a preferred option since it only requires low repayment amount at the beginning and frees up money for investing to the other avenues.
The balloon mortgage is a modified fixed rate mortgage that allows the policy holder to pay a fixed interest rate for a specified amount of time. The rest of the loan should be paid completely after this specified time has passed. This allows for quick repayment of the mortgage loan and the general duration of such policies is around five years.