Types of Mortgages

There are two main "types" of mortgage available in Ireland. Interest only. Repayment. There are also mortgages that combine these two together, allowing the borrower to pay only interest in the early stages of the mortgage and pay more of the capital as the mortgage term goes on. These are known as low start mortgages. As well as these two main types of mortgage there are several other mortgage products available, which can also be combined: Cash back. Flexible. Offset. Current account.  These can be combined in different ways. For instance some lenders may offer cash-back on an offset mortgage, and most mortgages today are flexible, so many lenders will offer flexible current account mortgages for example. There are also these three types of interest only mortgage: Endowment. Pension linked. Mortgage lenders also offer these types of mortgage for a short period at the start of mortgage terms to attract new customers. These types of mortgage rates usually last for between 1 and 5 years: Capped rate. Discount rate. Fixed rate. Base rate tracker. Deferred rate. For more details visit www.ifsra.ie

How do I choose a mortgage?

With all these mortgage options available it can be difficult to choose the right deal for your circumstances unless you are an expert. An online mortgage resource is a good place to start. You can compare the different mortgage lenders and brokers, apply online, and find out what all these new available mortgage options are. Mortgages are now available for people wishing to buy-to-let, people with no deposit wishing to buy a home, people with adverse credit history, people who already own a home and want to switch lenders and of course your average home movers and first time buyers.

Mortgages Explained.

A mortgage is a loan secured on a property, also known as a home loan. A mortgage is usually acquired from a lender to buy residential property. However it is becoming increasingly popular for existing homeowners to switch mortgage lenders without moving home - this is known as remortgaging . Mortgages are long term secured loans usually repaid over a fixed period known as a mortgage term. Not all mortgages run over a fixed term. Flexible mortgages allow the borrower to pay the mortgage off early or in some cases late. With a flexible mortgage the borrower may also be able to make early payments, take payment holidays and even borrow back some of the home loan. Getting the best mortgage deal In recent years the number of different mortgage deals available has increased, creating a multitude of different mortgage options. These include a number of different repayment options, interest rates and incentive offers. This increased choice of mortgages has caused remortgaging to increase in popularity in recent years. With mortgage lenders offering introductory incentives and interest rate discount borrowers are now starting to treat mortgage lenders much more like gas and electricity suppliers - Shopping around carefully in order to make massive long term savings. Unsecured Personal Loans For Unsecured personal loans for any purpose. Homeowners or tenants welcome.

What is meant by the terms of a mortgage?

The Term is the difference between the start and end date of the mortgage. You can choose terms from 5 years upwards.The terms is genrally 10, 25 or even a 40-year term. At the end of the term of the mortgage you can either pay off your mortgage or renew the mortgage.

What is better - short-term or longer-term mortgage?

The usual thinking is that you should take a longer-term to lock in low interest rates; when interest rates are higher, you should look to a shorter term - 6 mos. or 1 year. Whenever the interest rate spread between short term and a long-term mortgage rates are significant it is always better to take the shortest term possible. Currently, rates are historically very low, so most people are locking in for terms of 5 or even 10 years.

What is meant by amortization?

The amortization period is the number of years it takes to repay your mortgage in full. Often when you first get a mortgage it is amortized over 25 years. This means that if you maintained those terms and payment periods, your mortgage would be paid off in 25 years. However, in most cases the amortization period changes because different borrowing terms, interest rates and payments against the principal amount at each renewal vary the length of time required to pay off the mortgage. For example, going with a shorter amortization period - say 15 years for example - will result in higher payments per period, but save you money in interest by enabling you to retire your mortgage sooner.

What is the difference between a fixed and variable rate mortgage?

Fixed rate means that the rate of interest charged for the term of your mortgage is a set amount and does not change over the term of your mortgage. A variable rate mortgage is one in which the rate of interest will fluctuate in accordance with a bank trend setting rate. This is typically the bank prime rate. Adjusted on a predetermined basis, usually monthly, the rate can be set below, equal to or above the trend setting rate and will move up and down accordingly with that rate. A drop in interest rates will mean that more of your mortgage payment will go towards reducing your mortgage principle. If interest rates rise then less money will be used for reducing your principle and will instead be taken up in the higher interest costs. If you think interest rates will fall over the next 3 to 5 years then purchasing a variable mortgage would make sense. Usually fixed rate mortgages will cost you more since the lender is unprotected from the possibility of future interest rate increases. You generally pay less for a variable rate mortgage because it is you that is taking the risk of uncertainty as to how interest rates will move - up or down.

What if I have variable interest rate mortgage and interest rates start to rise?

Most variable mortgages give you the right to switch to a fixed rate at any time, with no charge. If you think the interest rate rise is a long-term trend then you would exercise the option and switch to a fixed rate.

It is possible to negotiate a better mortgage rate?

Often it is possible to get an additional ½ to 1% off the lender’s posted ‘best available’ rate, if you know how to go about it. Using a mortgage consultant allows you to effectively ‘shop around’ for the best rate among competing lenders. Often mortgagees will bid against each other when a buyer is represented by a consultancy service. And when you use a mortgage consultant, only a single credit report will be necessary.

How much better off am I with weekly vs. monthly payments?

Despite popular belief, and a lot of vendor marketing, the advantages in weekly vs. monthly payment frequency is slight. It is not really the frequency that makes a big difference but how much you pay. Any extra payment towards your principal dramatically improves your amortization period. Think payment amount not frequency of payment.

What is the advantage of a pre-approved mortgage?

The purpose of a pre-approval is to confirm in writing the maximum amount of money that you can rely on for mortgage purposes. When interest rates are fluctuating, it’s an advantage to know what your borrowing limit is before you start house hunting. With a pre-approval, a lender will guarantee you for a specific mortgage amount for a period of time. If the mortgage interest rate drops before the lender advances the funds for a mortgage, you are given the lower rate. If the rates rise, you are given the rate at the time you had the mortgagage pre-approved.

What sort of lenders do mortgage consultants usually deal with?

Mortgage consultants typically do business with the leading lenders, including the chartered banks and mayor financial institutions.

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