Picking a mortgage is an important step to buying a home. It can be overwhelming when you are unsure of how to handle interest rates. To assess the mortgage you want, you must know if you can afford the fees and the interest charged. This will help you choose the option that best fits your budget.
Every mortgage company in Seattle will list their interest rates on their websites or in their marketing material. It is a good idea to compare options before settling. The following are the options you will encounter.
Fixed Rate
A fixed interest rate will stay constant for a set time, often in years, despite changes in the market and bank rates. In most cases, this rate is provided for a maximum of five years, but this varies depending on the mortgage provider’s terms.
People prefer this because it does not have any surprises when external factors change. Those working on a limited budget can benefit from this interest rate. Note, however, that this will tend to be high compared to cases where the interest rate is variable. What is more, if the bank standards cause the prices to change, you do not benefit as long as you work with a fixed rate.
There are cases when you might want to terminate your contract early, for example, in the case of early retirement. In such cases, you have to be willing to pay the fees that are attached. You can only change to another mortgage after the fixed rate period but you must notify them three months prior. Otherwise, you move to their standard variable rates.
Variable Rate
A mortgage with this kind of interest means that the amount you pay can change any moment depending on market factors. It is always a good practice to keep savings as long as they are working with this interest. That way, you can keep making payments should change happen.
A standard variable rate is the kind of tariff that applies to the condition that you do not get another mortgage. One advantage of going this way is that when market interests fall, you pay less. You also enjoy more freedom because you can overpay or get out any time you want. You are not tied to any contract. The ability to overpay on a mortgage can lower the overall cost of your payments.
Discounted Rate
In this case, the lender will apply a discount to your standard variable rates. However, this happens for a limited period, often a maximum of three years. It starts cheap, so you pay low monthly fees. However, the lender reserves the right to raise their charges, so that could increase your discount rates. There are often attached charges to leaving a discounted contract before it ends.
In some cases, a lender might offer a mortgage that moves alongside the interest rate. This usually happens for a short time though. When it comes to mortgage rates, be sure to work with a financial advisor if you do not want to mess up your economic development in the period you are tied to a contract.
