Buying a home is a big investment and can take a large chunk of a household’s income every month. This is especially true if the interest rates are very high, as can happen with some mortgages. These high rates are very hard on households that already have a lot of debt to pay back.
However, if you follow the next few suggestions, then you can learn how to protect yourself from rising rates on your mortgage payments.
Fixed Rate Mortgages
A great way to protect yourself from rising rates is to get a mortgage that has a fixed rate. This way the interest rate will remain the same for the entire life of the mortgage, which means the home buyer can budget for the monthly payments because they know exactly what to expect every month when the payment is due.
Fixed rate mortgages vary in the amount of time required to pay them back and the amount of interest, but unusually have a payback period of between 10 and 30 years. Some plans offer a lower interest rate if you make a hefty down payment of around 25 percent of the price of the mortgage.
Get a Very Long Term Mortgage
Another method of lowering your payments and interest rates on a home mortgage is to make the mortgage payback time extra-long. For instance, some banks and other lenders are offering mortgage payback periods longer than 30 years. The disadvantage of this is that even though the rates are lower, since you are taking longer to pay it off, the final price of the home will be higher.
Cap Your Mortgage Interest Rate
If you have chosen to get one of the variable rate mortgage loans instead of a fixed one, there are still ways to manage the mortgage interest rates. You can do this by capping it, as some lending facilities have this option. This means that, for instance, if your mortgage interest rate is capped at one or two percent above your current rate, that it may go higher than what you are paying now, but at least you will be able to predict just how high the payment may go over time.
Mortgage Refinance
It may be a good idea to refinance your current mortgage loan to get a lower mortgage interest rate if you bought your home a few years ago and now find that current rates are much lower than yours. It’s best to talk to a financial specialist to see if this option is worth it to help you to pay less interest on your home mortgage loan.
It’s true that there is no real way to predict just how high or low mortgage interest rates can get to over time, as the market is always changing. Consumers can only compare interest rates at different banks or other mortgage lending facilities and lock in the best possible rate offered at the time they get their mortgage loan.
Labels: mortgage advice, mortgage advice nottingham, mortgages
