When you are looking around for a mortgage, the proliferation of different mortgage rates can turn the whole thing into a huge headache. High rates, low rates, fixed rates, variable rates – it can be hard to know where to start and in the confusion you could find yourself paying far more in monthly payments to the bank than necessary. Therefore it is important to know about the different mortgage rates and to understand the benefits and drawbacks of each.
High mortgage rates are usually applied to people who the bank considers to be high risk, as in that they are quite likely not to be able to always make their monthly payments. High mortgage rates are the bank’s way of making sure it gets paid for the risk it is taking by loaning money to these people. Hopefully you don’t fall into this category, but if you do don’t despair – there are mortgages and mortgage rates designed especially for people like you and you just have to look around for them and do your homework before committing yourself.
Low mortgage rates are preferable as these mean that you will pay back less money over the term of your mortgage. However, these are often only available to buyers who fall into certain categories, such as first time buyers or people who are willing to sign up for a longer term mortgage, such as twenty years or more. There are also certain low-income sectors of society which have greater access to low mortgage rates. Do your homework, as you may fall into one of these categories without knowing it and the benefits, when it comes to mortgage rates, can be huge.
Fixed and variable mortgage rates can cause huge headaches, but they are relatively easy to understand and could be the tie-breaker between this mortgage and that one. A fixed mortgage rate remains the same for a certain length of time or throughout the term of your mortgage. For instance, a mortgage rate might be fixed for the first five years of the term and then become variable. Fixed mortgage rates have good and bad sides, like everything in life. The good thing about a fixed mortgage rate is that you will always know how much your payments are going to be every month, no matter what happens. If you are on a fixed salary and anticipate being on that salary for the rest of the term of your mortgage, then you might want to get a fixed mortgage rate. This also means that if interest rates rise above your mortgage rate, it won’t matter – you will still pay the same amount. Of course this means that if interest rates go below your mortgage rate you will still pay exactly the same, and this can be somewhat depressing.
A variable mortgage rate produces the opposite situation. Your payments will vary each month with the interest rate, which can be good and bad. After all, if interest rates fall, your mortgage rate and payments will too, and this can be great. However, in the world of finance what goes down can nearly always go up and interest rates can in theory rise infinitely high. This means that you will never know from one month to the next what your monthly payment will be and this can be a difficult situation to live with. In the end, the mortgage rate you choose depends entirely on what you can live with.
Austral Mortgage offers competitive
mortgage rates for both residential and commercial loans. We also provide easy to use
mortgage calculator to help you take some of the guesswork out of your home loan and investment decisions. Check out our special First Home Buyer and Investment Loan.
