Home buying is a big decision. It is something that takes many people some time to decide which mortgage to choose and which one to go with. It is not something that can be decided over night or in a heartbeat. You have too many choices like fixed or tracker rate mortgages.
Your Search for the Ultimate Mortgage
Choosing a mortgage should be given careful consideration, while looking at all the available options when it comes to the mortgages that are out there. When possible, being able to lock in a lifetime mortgage rate is a great choice, as the interest amount will never change.
As there are so many mortgages available and options out there, such as fixed or tracker rate mortgages, you want to give each careful consideration. Deciding which mortgage to choose does come down to timing, however, it also comes down to how much you make and how much the mortgage will be.
Your yearly income and the cost of the home play a larger role in determining which mortgage you can get, more so than the timing of the mortgage market. Being able to lock in a lower interest rate is always better than a variable interest rate.
Lifetime Mortgage Products
In the lifetime mortgage world, you have the option of going with a fixed or not fixed rate. A fixed rate means the interest rate remains the same over the lifetime of the loan. This sounds great, but what happens if the market changes? Could you end up paying a lot more than you should have? Perhaps you had an inheritance you wanted to leave behind but the fixed rate wiped that out? These are things you must consider as you look into the fixed or tracker rate.
Tracker or not fixed interest rate means you are following market trends. The rate will move when the market interest rates move. You may see your interest rate lower over time or if the market picks back up and rates improve, the rate could increase to more than any fixed rate would have been.
Gambling on your Inheritance
A tracker rate is a bit of a gamble when it comes to lifetime mortgagees. You could live for the next 30 years and see the rate go up and down each year, only to find in the end it averaged out to the fixed rate you could have got. When making a decision about what is best for you and your family, these are considerations you have to make. It also makes examining the market industry important. What are the projections? There are always projections for where the economy, interest rates, and financial products will be in a year, five years, or ten years. This would be a good indication of whether a tracker rate would be better.
Getting into Interest Only Mortgages
A lot of focus has been on lifetime mortgage products and their interest rates. Now consider the interest only mortgage. This is a mortgage where you pay a monthly payment of interest. You are not paying on the principle sum at all. For a lifetime mortgage you could be paying a fixed rate, so the monthly amount never varies. If you go with a tracker rate, you may not know from one month to the next what you are going to have to pay.
For retirees with a fixed income it can be difficult to always pay a different amount on the interest due to market changes. Also keep in mind an important factor of low rates.
Economic Crisis Over
The economic crisis of the last several years is over; however, interest rates have not bounced back. They are still very low. The lowest they have been, which means locking in a fixed rate is ideal. In 10 or 20 years, you may never see interest rates this low again. It has to factor into your decision. With an interest only lifetime mortgage at fixed interest rates, the lowest in decades, you could be making the most affordable mortgage payment of your entire life. It all depends on the research you do, what you feel is the right option, and what you feel will happen down the road in 10 to 30 years.
Having these options available to you can make all the difference in the mortgage you receive. Again it means going through all your available options and choosing carefully based on what will work best for you and the life of the mortgage, whether this means fixed or tracker rate mortgages or something entirely different.