| A mortgage is a loan that is paid back over a set | | | | property within a shorter period of time. The borrower |
| period of time. Taking a mortgage therefore involves | | | | can also choose a bi-weekly payment option rather |
| paying a certain amount as interest in addition to the | | | | than a monthly one. This reduces the period of the |
| principal borrowed. Mortgages can be broadly | | | | loan, and thus results in lower interest costs. |
| classified into two types based on the interest rates. | | | | Various kinds of adjustable rate mortgages are |
| These are fixed rate mortgages and adjustable rate | | | | available. In the case of a capped interest rate, the |
| mortgages. Most financiers currently offer a number of | | | | maximum interest rate to be paid is fixed. The lender |
| variations of these two basic types of mortgages. | | | | cannot demand more than this, even if interest rates |
| The monthly interest payments remain unchanged | | | | go up. In the event of interest rates falling, however, |
| through the whole term in fixed rate mortgages. Thus | | | | the borrower pays less. |
| the borrower does not encounter the problem of | | | | Discounted rate mortgages have an initial |
| having to make unexpected large payments. Fixed | | | | predetermined period when the interest rates are |
| rate mortgages are usually taken for 15 or 30 years, | | | | reduced. At the end of this period they revert to the |
| although other terms are also possible. | | | | standard rate. First-time buyers may find this an |
| Although the monthly payments may be lower, the | | | | attractive option. In variable rate mortgages the rate of |
| borrower pays more as interest on long-term loans as | | | | interest changes with fluctuations in the bank rate. |
| opposed to shorter-term loans. A short term also | | | | Thus, a wide range of options is currently available for |
| means that the buyer gets full ownership of the | | | | those who wish to apply for a mortgage. |