What type of mortgages are out there

There can be a fee for the day-to-day banking transactions you do through the account. An offset mortgage setup can reduce the amount of interest you pay on your mortgage. Typically, interest is payable on the full amount of a loan.

But by linking your loan to any savings or everyday accounts you already have, you pay interest on that much less. Linking as many accounts as possible — whether from a partner, parents, or other family members — means even less interest to pay. Reducing or straight line mortgages repay the same amount of principal with each repayment, but a reducing amount of interest each time. These are quite rare in New Zealand. Payments start high, but reduce in a straight line over time.

Fees are similar to table loans. We pay the interest-only part of our repayments, not the principal, so the payments are lower. Some borrowers take an interest-only loan for a year or two and then switch to a table loan. The normal table loan application fees apply. With a fixed rate home loan the interest rate you pay is fixed for a period of six months to five years. At the end of the term, you can choose to re-fix again for a new term or move to a floating rate.

Lenders of floating rate loans will lift or lower the interest rate as interest rates in the wider market change, normally linked to the Official Cash Rate OCR. This means your repayments may go up or down. You can split a loan between fixed and floating rates.

This lets you make extra repayments without charge on the floating rate portion. Splitting a loan can give you a balance between the certainty of a fixed rate and the flexibility of a floating rate.

How much of your loan you have in each portion depends on which of these is more important to you. For advice on how to set up your mortgage, you may want to talk to a financial advisor who specialises in mortgages.

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What are the Current Circle Rate in Mumbai? What are the Current Circle Rate in Lucknow? What are the Current Circle Rate in Gurgaon? What are the Current Circle Rate in Kolkata? What is Property Tax? The Basic Types of Loans 1. Interest-Only Mortgage Interest-only mortgages give you the option, during the first five or 10 years, to pay only the interest portion of your monthly payment instead of the full payment. Special Assistance for Certain Groups 4.

VA Loans These loans make it easier for veterans of the U. More Exotic Types of Loans 6. Balloon On a balloon mortgage, you pay interest only for a certain period of time — five years for example — and then the total principal amount is due after this initial period.

If you plan to stay in your home for at least seven to 10 years, a fixed-rate mortgage offers stability with your monthly payments. Unlike the stability of fixed-rate loans, adjustable-rate mortgages have fluctuating interest rates that can go up or down with market conditions. Many ARM products have a fixed interest rate for a few years before the loan changes to a variable interest rate for the remainder of the term. You must be comfortable with a certain level of risk before getting an ARM.

In addition to these common kinds of mortgages, there are other types you may find when shopping around for a loan. These include:.

Before moving forward with any mortgage, carefully consider your financial situation. Review your circumstances and needs, and do your research so you know which types of mortgage loans are most likely to help you reach your goals.

How We Make Money. Miranda Marquit. Written by. Miranda Marquit is a contributing writer for Bankrate. Miranda writes about topics related to investing, saving and homebuying.

Edited By Suzanne De Vita. Edited by. Suzanne De Vita. Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Reviewed By John Stearns. Reviewed by. John Stearns.