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Get smart about mortgage rates

By Jack Smith Subscribe to RSS | April 12th 2012 | Views:
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Everyone in life, at one point or the other, may need to turn towards the option of mortgage for either fulfilling some prior made financial commitments or to make certain new ones. Once your goal is set, you have identified your needs and set the correct expectation, then you should commence the tedious process of looking out for the best mortgage rate available in the market. And if you are out in the market looking for some good mortgage rates, there is a thing or two that you ought to know in order to make a wise choice.

Though seemingly complicated, Mortgage rates are of various kinds- fixed rates, capped rates, discount rates, or cash-back opportunities. And once your requirement is chalked out, you, as a consumer, have the option of choosing the mortgage rate that suits your needs the best. Let us see what each variant has in store for us.

To begin with let’s talk about fixed mortgage rates. Fixed mortgage rates rate is such an option that facilitates a consistent interest rate, fixed for a pre-determined time period. If you have plans of a period of more than five years, it makes sense to opt for this type of a mortgage rate. This is simply because a time period of less than five years usually results in the fixed rate becoming too high in comparison to the market rate.

Then comes the second kind of mortgage rate- Capped mortgage rates. Though Capped rates are pretty similar to fixed mortgage rates, they allow for some fluctuation. There is a minimum rate cap and a maximum rate cap, which means that neither will you pay higher than a certain interest rate and nor will but pay lower than a certain rate either. However there is a minimum interest that must be paid each month, referred to as “collar”. The capped rate mortgage deal is commonly offered over the same time frame as the fixed rate deals.

Another kind of mortgage rates is the Discount Rates. This kind of option refers a set discount margin on the rate paid monthly. Various discount rate mortgage plans have differing increases and decreases in discount along the course of the mortgage's repayment. However, it is important to note that the pattern is usually predetermined.

Last but not the least comes the Cash-back options. This type of mortgage rates gives you a percentage of the mortgage as cash in your hand at the outset. This means that the cash-back option allows you to have extra cash available for paying off existing debt, or to invest in a new property. Most commonly, this package comes with a standard variable rate or the usual tracker mortgage rate.

While these rate options may seem confusing to the first time mortgage buyer, studying them deeply certainly pays off in the long run.

Jack Smith - About Author:
Author has experience in providing information about Best Mortgage Rates and Mortgage Advice and solutions. For more information on Mortgage Rates, Please visit: http://www.bestmortgagerates.com

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