5 basic types of mortgage rates that a borrower can get
There are different types of mortgage rates available in the market. The mortgage rate that you will receive will depend upon a variety of circumstances. The total amount of money that you will pay for the mortgage loan will be determined by the interest rate of the mortgage. If you get a mortgage loan that has a lower rate of interest then you will have to pay less amount of money.
Types of mortgage rates
The various types of mortgage rates that a borrower can be offered are:
1. Fixed rate: The rate of interest of this mortgage is fixed. This means that the mortgage rate is constant. Therefore, your monthly payments will not change. This loan is available for a long period of time (10, 20, 30 years). This mortgage is very popular as the borrower has to make payments for a fixed period of time.
2. Adjustable rate: The interest rate of this mortgage is variable. This means that the mortgage rates will vary with time. The mortgage rates may increase or decrease. Your payments will be more if the interest rate increases.
3. Split rate: The total balance can be split into two halves. A fixed rate will be charged on the part of loan balance and a variable rate will be charged on the remaining part. The total loan balance can be split into 50/50, 75/25, 60/40.
4. Introductory rate: The rate of interest of this mortgage is very low. The mortgage rate is normally 2 percent less than the average home mortgage rate. This sort of rate of interest lasts for about 6 months to 1 year. After this time period, the borrower has to make payments at the average rate offered by the financial institutions.
5. Fixed and variable rate combined: The rate of interest of this mortgage is fixed for about 3 to 5 years. When the fixed period has expired, the interest rate will vary every year based on the index and margin it is tied to.
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