Picking the Right Mortgage

Picking the Right Mortgage

After finding the right home, you need to decide what sort of mortgage is best for your needs. With so many choices to pick from, finding the right mortgage is never aseasy as it sounds. Many factors need to be taken into consideration before picking the right mortgage, and everything is not always so black and white. In this article we will cover the different types of mortgages, and the pros and cons associated with them.

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Variable rate mortgages

Variable rate mortgages work inline with the lenders interest rates, if they increase your monthly mortgage will increase, if they fall, so do your payments. One of the main benefits of variable mortgages is that you can pay back more than then the agreed amount each month without facing a penalty, along with paying lower rates if interest rates drop. They are also ideal for anybody who is looking to pay off their mortgage quickly.The downside to variable rate mortgages are that if interest rates rise, so do your monthly outgoings.

Fixed rate mortgages

A fixed rate mortgage is an amount agreed upon by the homeowner and lender, you agree to pay back a fixed amount over a set amount of years. The main advantage with fixed rate mortgages are that the homeowner knows exactly how much they need to pay each month, and can budget accordingly and expect no shocks.The downside to fixed rates are that if you want to pay more back each month, you are charged an extra fee, and if you wish to ‘break’ your mortgage, even heavier fees are involved.

 Split mortgages

A split mortgage is the combination of the both and allows homebuyers to hedge their bets by having 50% of their mortgage as a variable, with the other 50% being fixed.Most lenders allow you to work the percentages in which ever way you see fit.Which loan is best for me? Well that really depends on several factors. For example, do you plan to sell your property, move location or intended to pay a lump sum of you mortgage off in the near future? If so, then a variable mortgage may be the smarter option given the break costs and restrictions of paying more of your mortgage off with a fixed rate. You may not know this, but break costs can be upwards in the tens of thousands depending on your contact.On the other hand, if you’re starting a business or putting one of your children through university, going with a fixed rate mortgage may be wiser. You will know exactly how much goes out each month and can correctly budget for other aspects of your life and business. Market conditions, current and future interest rates all play an important role in aiding your decision. At this moment in time, fixed rates mortgages have been the lowest they have ever been in Australia, and it may be wise to jump over now before they increase. If you would like to know more about mortgages and which would be best for your circumstance, feel free to send an email or give us a call, our experts are always on hand to help.