An understanding of Mortgages
Written by JDPGlobal | Wednesday, 06 July 2005
Mortgages are neither simple nor straightforward. The market is very competitive and banks are continuously updating and extending their portfolio mortgages.
Central to any mortgage plan is to forecast how the borrowed capital will be paid back and at what interest. Essentially the initial decision must be an appreciation of how much you can afford to re-pay each month – over years – known as a repayment mortgage or pay it all off at the end of the term – known as a pension mortgage, ISA or endowment.
Interest payment can be paid on the going rate of the loan under variable rates. The total consequence of any interest rate changes is calculated once every twelve months and re-payments are altered accordingly.
If the borrower believes that rates might increase then in might be an idea to take out a fixed rate mortgage. Where the rate is fixed for an agreed period agreed there are no gains if the rates fall during that time. Capped rates are unlike fixed rates because if rates fall then the borrower has to re-pay the lower rate.
