Mortgages in 2015
By Kathryn McDowell

In 2015 there are several types of different mortgage loans that are available. How do you wade through them to find out which one will be the best option for you? One way is to learn about the pros and cons for each type and then narrow the field from there. To that end, we will discuss a few of them and their pros and cons.

Fixed Mortgages vs. Adjustable Rate Mortgages

When you are looking at taking out a mortgage then you first need to decide whether you want one that has a fixed rate or one that has a rate that is adjustable. Every single type of mortgage will be either one or the other. Incidentally, you might also have a mortgage that combines the two. Here is a quick breakdown of the differences.

• Fixed Rate loans will have an interest rate that will remain the same for the duration of the loan. Due to this, your monthly payment will remain the same until the loan is completely repaid.


• Adjustable Rate loans have a rate of interest that can and will fluctuate. In many cases you will have a fixed rate of interest for the first year and then will change on a yearly basis. Loans that have this first 'fixed' period are the hybrid loans.

Loans of both types do have their pros and cons just as all things do. A pro for adjustable rate loans is that the interest rate that they begin with is often lower than that of a fixed rate loan. However, the interest rates in the future will vary and this can turn into a con quickly. The monthly payments on an adjustable rate mortgage can and often do rise exponentially the longer they are carried. Alternatively, a pro for the fixed rate loan is that your monthly payment amount will never change. However, due to that the rate of interest is generally higher.

Jumbo Loans or Conforming Loans

Aside from the basic types of loans there is another thing that must be considered. That is the actual size of the loan that you need. The amount of money that you are requesting will put your loan into one of two categories: jumbo loans or conforming loans. What is the difference?

• Jumbo Loans will be for an amount of money that exceeds the limits for conforming loans that are set forth by the Freddie Mac and Fannie Mae organizations. The lender of these types of loans will have a higher amount of risk than that which is experienced with a conforming loan. However, borrowers for this type of loan must have a credit history that is impeccable and must also come up with a substantial down payment as compared to what is necessary for a conforming loan. Additionally, interest rates for jumbo loans are typically higher when compared to the rates associated with a conforming loan.


• Conforming Loans are those that meet the parameters set forth by the Freddie Mac and Fannie Mae organizations. Typically these guidelines have to do with the size of the loan. Both Freddie Mac and Fannie Mae are entities that are controlled by the government. They both sell and purchase securities that are backed mortgages. In plain English, they buy the loans from various lenders where they are generated and then they sell those loans to various Wall Street investors. Conforming loans will be those that fall within their regulated size limits as well as those conforming to their other criteria.

Now that you have this information, making the decision as to which type you need should be a little easier.

Kathryn McDowell is a finance writer recommends checking out all of the different mortgage options you have when searching for a loan. With this information you can make an educated choice for your home. mortgage

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Variable Interest Rate Home Loan

Variable Interest Rate Home Loan
By Frank Zelasko

What is a Variable Interest Rate Home Loan?

A variable interest rate home loan (sometimes also referred to as a "floating" or "adjustable" rate home loan) is a very popular product in the lending market and a very competitive product offered by most of the lenders/credit providers.

Who is Suited to a Variable Interest Rate Home Loan?

This type of home loan is a perfect fit for:

>> First-time home buyers who just want a home loan product that is simple and not confusing to manage

>> People who just want to stay settled and are not willing to move whether in their work, home, personal life or they are not willing to move to another lender

What Should I Consider When Choosing the Loan?

When choosing it, you should always research and consider the following terms & conditions, being offered by the many lenders/credit providers:

>> Treat any "honeymoon" interest rate offers with caution, and remember to always check whether the discount rate applied to the variable rate is a set amount below whatever the standard variable is

>> Remember that low rate home loans are not always the best choice

>> Try to pick a loan term that suits your finance

>> Decide on what matters most to you (e.g. does it meet your financial goals?)

What are the Features of a Variable Interest Rate Home Loan?

You must know all the below mentioned features of the loan package so you can maximise the benefits:

>> Take advantage of falling "interest rates" when the Reserve bank decides to drop their official rates

>> Make unlimited "extra repayments" each month so you can pay off your home loan faster

>> Take advantage of "redraw facilities" so you can withdraw any extra payments you have made on top of your normal repayment amounts if you need the cash

>> Take advantage of a 100% offset account

What are the Advantages and Disadvantages?

There are many advantages of choosing the loan package such as:

>> Flexibility: It has some flexible features like having options of making additional payments, low introductory interest rates or redrawing facility.

>> Lower repayment option: As the interest rate varies with that of the market index, if the rate falls, the amount of repayment also becomes lower.

>> Ability to pay off the loan faster: This loan type also has the option of enabling you to pay an extra repayment as advance towards the loan. Thus, every month, if you pay an extra amount in addition to your minimum payment amount, you can repay the loan faster.

>> Helps in Budgeting: As this loan gives you the option of weekly, fortnightly or monthly repayment, you can maintain your budget accordingly.

>> Redraw Facility option: This loan type gives you the option of redrawing the additional amount you have made towards the repayment, in addition to the minimum repayment amount.

While the loan has a lot of upsides, it does have some disadvantages, such as:

>> Variable rate is subject to fluctuations: The interest rate is subject to fluctuations and can either rise or fall at any time during the period of the loan. Changes in the interest rate are at the discretion of a lender and they are meant to be broadly in line with market conditions

>> Repayment may become more: So if the interest rate rises, the amount of monthly repayment also becomes more and it may become more than the amount you can afford.

>> Redraw facilities can be subject to limitations, including minimum withdrawal amounts allowable and may also include redraw fees

>> You cannot arrange a rate lock

>> You cannot pay Interest in Advance in some circumstances

>> This loan type offers fewer features than the general loans

What are the Benefits in Making Extra Repayments?

The benefits available to you in making the extra repayments towards your variable interest rate home loan are best illustrated in the following example. The example assumes that you are willing to contribute an additional amount of $200 towards your weekly repayments:

Loan Amount: $530,000

Normal Loan Term: 30 years

Interest Rate: 5.00%

Repayment Frequency: weekly

Normal Weekly Repayment: $656

Extra Weekly Repayment: $200

Interest saved by making extra repayments: $217,815

Time in years saved, by making the extra repayments: 11 years 10 months

Now that you have thorough information of the variable interest rate home loan, you can discuss about it without your finance broker and find the perfect home mortgage loan.

Singh Finance is the ideal finance brokerage firm of every Australian home buyer. Call on 0424 190 908 for quick approval on 0 savings home loans. You can even enquire online for different loan packages like cheap commercial loans and quick short term second mortgage.

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