07 Jul Which Type Of Mortgage Is The Right One For You?
The following mortgage options are the most common, and knowing which one is best suited to you and your personal circumstances, can be achieved with the help of a qualified and experienced mortgage broker.
Open mortgages:
These are best suited to those who want to make significantly large mortgage payments or pay off the mortgage in its entirety without being penalized. Those buyers who wish to do this, must be prepared to accept fluctuations in the interest rate.
Closed mortgages:
The period in which the home buyer can pay off the mortgage is predetermined, along with the rate of interest, and if they choose to pay it off in full before the end of the closed term, they will likely be penalised. The rate of interest chosen may be variable or adjustable, depending upon
the buyer’s needs.
With lower rates than open mortgages, many lenders permit borrowers with closed mortgages to make lump sum payments of up to 10, 15 or 20% of the original mortgage amount, once a year without being penalised.
Convertible mortgages:
These mortgages give homeowners the opportunity to alter the mortgage type during its term and come with lower rates of interest. For example, if the buyer initially wanted an open mortgage and then chose to lock into a closed one, a convertible mortgage enables them to do so without having to pay a penalty.
Hybrid mortgages:
When registering, if more than one type of mortgage is contained in the agreement, then the term ‘hybrid’ is used. From 2 right up to 100 different types of mortgage can be registered, and lenders have their own individual names for these. These mortgages are best suited to borrowers who are highly in tune with their financial needs, and who will use it as part of their overall financial plan.
Reverse mortgages:
For those who are 55 and older, a reverse mortgage enables them to convert their home equity into a lump sum payment or regular payments to be used for living expenses. When the homeowner wants to vacate the property (for whatever reason), or they pass away, the balance of the loan is due and usually settled from the proceeds of the sale of the property by the owner, or whoever inherited it.
Often, it’s not always straightforward to know which type of mortgage is right for you, and with the global pandemic that we’re currently experiencing, your options, or your personal circumstances, may have altered. Working with an independent mortgage broker is the best way to ensure that you don’t make the wrong choice when it comes to buying a mortgage, and is often the swiftest way to make sense of the complex world of lending.