Understand the Detail of a Mortgage

It is generally acknowledged that real estate is an excellent investment. On occasions it is not so good in the very short term and there is no better example than during the recession. Many people who had bought just prior to the Collateralized Debt Obligation (CDO) Crisis with large mortgages often found their debt was greater than the value of their property and still is in some instances. Those who have been able to maintain their payments and intend to do so in the coming years have not actually lost any money. They have yet to get the growth they were hoping for when they bought though it is likely to come, albeit more slowly than they anticipated. It does show it is wrong to assume immediate growth and highlights the need to look at a mortgage in detail to see the true cost rather than accept headlines at face value, if you are a person who is in need of a Clopton Capital commercial bridge loan you need to understand what mortgages is about first.

Fixed Rate

The fixed rate mortgage is popular and quite rightly if interest rates are at an historic low in modern day terms. It is unlikely to get better than at present with interest rate trends suggesting a rise in the near future, and certainly not a fall. So what are the pros and cons of fixed rate mortgages?

There is nothing hidden with a fixed rate mortgage. An applicant will know from the outset how much he or she is expected to pay back during the term of the loan. The amount borrowed, the interest and fees payable are totalled, and divided by the number of months in the term to produce the monthly instalment due. It is an easy way for a family to budget. It is the safe route to take but lenders are in business to make money themselves. They cannot predict how interest rates will vary; sometimes fixed rate mortgages can be over a term of 30 years. Inevitably they will need to charge a premium rate to offer a fixed rate facility.

There are a few pointers to help someone decide whether a fixed rate is for them and certainly one of the key questions raises the same issue. What will rates do over the period of the loan? No one is to know and it is a matter of being comfortable with what is on offer and the costs involved in any early redemption of the loan.

Affordability

In general applicants should work out whether the mortgage is affordable and whether they think they will stay in the property for a decent period. If that is unlikely the early redemption costs become even more critical.

There will always be plenty of alternatives in the market at any one time and anyone considering a fixed rate should do the research and ensure they grasp every detail of the ones they are considering; it is important to compare like with like. It is worth being skeptical about headline APR (Annual Percentage Rate) as such. Sometimes lenders omit the fees from the headline so it does not present an accurate figure every time. Fees can be significant; administrative, insurance, legal and valuation fees soon add up. The APR assumes that the borrower is going to keep the loan for the full term; evidence suggests that is actually rare.

Second Opinion

The answer may well be for prospective borrowers to get some help. It may just be to get a second opinion after doing all the calculations. If the real estate market behaves as it usually does a property bought at a keen price should certainly prove to be a good investment. A fixed rate mortgage takes one of the imponderables away; the monthly repayment costs. As long as an applicant has a clear picture of his or her commitment when signing up for a fixed rate mortgage and is comfortable with that it is not a bad route to take.