Everything You Need to Know About Mortgages
With so many things to choose from, it can be hard to find the perfect mortgage for you and your family. In this article, we will help you understand the basics you should know so you can quickly look for the deals that are the right deal for you.
Loan To Values
Often, when you are looking for a mortgage, you will see ‘LTV’ acronym mentioned a lot of times with a percentage just shown below. What LTV stands for is ‘loan-to-value.’ It refers to the amount of value of a property that you can borrow. The rest is the amount you should put down. This is how average down payment on a house in Texas is computed.
Let’s have an example. A 90% LTV mortgage means that you can only borrow 90% of the property’s value. So you just have to put down 10% as a deposit. If a mortgage has around 60%, you will need to put a 40% deposit to qualify for a mortgage. As such, the higher percentage of LTV that’s shown, the higher rate of mortgage it is.
Variable And Fixed Rate Mortgages
When it comes to mortgages, you usually have two types to choose from – fixed or variable rate. A fixed rate is one that will not move during the length of the deals so your monthly mortgage repayments will stay the same. As a result, this is one of the most popular arrangements for people who are on a strict budget and those who usually can’t afford a rise in the payments. Most often, this is availed by first-time buyers.
On the other hand, a variable rate mortgage has a varying rate. So your mortgage payments will rise if your interest rate increases.
How Do Discounted and Tracker Mortgages Work?
The rate of your mortgage usually tracks the bank’s base rate plus some percentage when it comes to tracker mortgage. As a variable rate deal, you should expect your price to go up and down depending on the base rate.Discounted mortgages are also considered as a variable. Most often, you will find that this type of mortgage offers a discount odd the standard variable rate of the lender for a set period. As such, if a lender has a 4.99% variable rate, you can see a discounted deal to have a 0.5% up for some years.
How Long Should I Tie Myself If I Choose To Fix?
A lot fixed mortgage deals mostly run from two to five years. However, some lenders can allow you a fix for a more extended period like ten years. These deals can be portable, so if you move somewhere else, you can take them with you. If you are going to borrow more money, then it will be at a different rate.
Ideally, you should tie yourself in a fix for as long as you can stay in your property since you will still effectively have to reapply of a mortgage if you move your mortgage. This can be tricky if you have changed circumstances.
And that’s it when it comes to everything you need to know about mortgages. Did we miss anything? Let us know in the comments below.