How to know if you should change home mortgage.

You know when you have to change your home mortgage like you know when you have to change your baby, it kind of stinks. How do you know if your home mortgage stinks? Well that is what this article is all about. Now before we get started in all the minutiae and technical (that might be a little bit of an overstatement) bits, let me tell you that this article can help you save an absolute fortune. It is nothing complicated, it just brings your attention to an excellent opportunity you should not ignore. Here it goes, if you have the right circumstances you could save thousands of dollars on your home mortgage. That kind of tells you your home mortgage stinks, right?

Why does changing home mortgage save you money? Isn’t a mortgage a mortgage wherever you get it.

Big mistake, mortgages are mostly different to each other. In fact most mortgages are always changing. Changing mortgages can save you thousands of dollars because of the different interest rates banks and finance companies offer. Interest rates are the percentage of the capital you borrowed that you pay back every year. If you buy a 100,000 dollar house and your interest rate is 8%, you will pay 8,000 dollars in interest (plus however much you pay off the capital) if the interest rate is 6% you pay 6,000 dollars. Yep you just saved yourself 2,000 dollars with a 2% interest drop.

Why do interest rates change?

Interest rates are like nearly everything you buy in your corner shop, the value depends on the cost of providing the good. If we were talking tomatoes, you would have to calculate the price of seeds, water, cost of labour, etc… plus a profit for the farmer and the shopkeeper. Apart from those basic factors offer and demand will either raise or drop the cost of tomatoes, cars and of course mortgages. In the case of mortgages the basic factor that controls the interest rate is the Government. The Government or an agency appointed by the Government decides what the interest rate is. Banks then take this interest rate and add a percentage for profit and running costs.

Now interest rates for Home mortgages are very low. The chances are that if you got your mortgage a year ago or later you will be paying higher interest than you should. As we mentioned offer and demand also control the price of home mortgages. Banks are pretty desperate to lend to the right customers, so if your credit rating is good enough you could make great savings on mortgage fees, setup fees and all the other extra fees linked with mortgage.

So what are you waiting for? Call your bank and get a detailed report on your current mortgage then ask for free quotes to at least five top banks and see how much you can save. You will be surprised.

The types or home mortgage rates, how to choose.

There are dozens of home mortgage rates and even more variations and hybrid mortgage rates. However the main mortgage rates are simple to understand and thankfully, also easy to explain. But let’s make sure we are all reading from the same hymn sheet and spell out some of the basics of home mortgages, that might seem like no-brainers but may require some explanation.

What is an interest rate? Interest rate is the percentage of the amount you have borrowed (the capital) you pay back to the bank or finance company that lent you the money. The interest rate is generally worked out yearly. However it is a point worth checking as some finance companies might try to confuse you with different terms of interest rate. For example if you read an advertisement that is selling a thousand dollar loan for 10% interest, that interest rate will mean that every year you will have to pay 10% of the capital you still owe. The first year it will be 100 dollars interest the second year it will be 10 per cent of the pending capital and so on.

What is an APR? An APR stands for annual percentage rate. It is a “universal” rate format of describing the interest rate of a loan. The benefit of the APR format is that you can compare different mortgage rates using the same standard. You can compare apples with apples and not get lost in the minutiae of different interest rate formats.

OK, now we have dealt with those two points lets continue with the main mortgage rates and how to choose from them.

The fixed mortgage interest  rate.

This is the easiest mortgage interest rate to understand. The bank you choose to give your business, (more on how to do that in other articles) will give you an interest rate for the entire tenure (or length) of the mortgage. That means that you will know exactly how much you will pay every month for the entire mortgage. It is great news for budget control freaks who like to know what their expenses will be. It is also good for people on a fixed income that need to spread out their expenses evenly throughout the year.

The variable mortgage interest rate.

This interest rate varies as the national interest rate changes. Normally the finance company will attach a set amount of percentage points on the going interest rate. The going interest rate is decided by the government and is used as a control to fine tune the country’s economy. These interest rates have the benefit that they are generally cheaper. The risk for the bank is less as there is no promise of keeping a fixed interest rate for the duration of the loan and there is a guaranteed profit no matter how high the interest rises.

The adjusted rate mortgages combine the fixed interest rate with the variable interest rate. For a set period 0f time the rate is fixed after which it becomes a variable interest rate. This is good for people that need temporary security  on the monthly payments but don’t want to pay the full buck of a fixed interest mortgage.