Shopping around for mortgages

When looking for a mortgage, there are some fundamental differences in the type of mortgages that the potential borrower should be aware of. So when you go to your mortgage lender, have some idea in your head of the type of mortgage that you want.

The Fixed Rate Mortgage provides an element of stability in repayments over a fixed period of time, so the borrower is assured that the rate will not shoot up due to fluctuations in the market. However, the borrower may also lose out if the market interest rate decreases, as the lender is not allowed to change the rate.

The Adjustable Rate Mortgage may also be fixed for a short while during the initial term of the mortgage, but these mortgages are eventually subject to the vagaries of the market and will go up and down accordingly, so your repayments will also fluctuate.

A Simple Interest Mortgage is governed by a continually negotiated daily interest rate and although you may pay a higher monthly repayment, you may save in the long term.

A Shared Appreciation Mortgage is where your lender may agree on a lower interest rate but will expect a share in the appreciated value of your house. So when you sell your house, the lender will be entitled to a portion of the profit.

Mortgages

In legal terms a mortgage refers to the transfer of interest in a property to someone who makes a loan on that property as an asset or collateral against an outstanding debt – although a mortgage is not strictly a debt but the lender’s security in case the person who has the mortgage does not pay the lender. The transfer of interest is made back from the lender to the owner once the mortgage is met. Simply put, if your house is still on a mortgage, in legal and technical terms it belongs to the lender or mortgage company until the terms of the mortgage are complete.

When you want to borrow the money to buy a house you may often be referred first to a mortgage advisor who will go into the details of the mortgage with you. Your mortgage advisor should be properly qualified and bound to adhere to the regulations laid down by the financial services’ authority. For many people, a mortgage is just a fact of everyday life, although there are many different types of mortgage. If you are looking to buy a house or remortgage the one that you are living in then your aim should be to get the best mortgage rate that you can.