| I Want To Own A Home: Which Bond Works For Me? |
| Articles - Mortgage |
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Bonds fall into two categories ? bonds with a fixed interest rate and bonds with interest rates that fluctuate during the loans duration. Fixed interest rates are more popular because the client always understands where they stand with the interest.
Bonds fall into two categories ? bonds with a fixed interest rate and bonds with interest rates that fluctuate during the loans duration. Fixed interest rates are more popular because the client always understands where they stand with the interest. Fixed rates are old-fashioned and popular among citizens including home owners, who want to have a bond with a consistent price. They would rather just pay up-front a fixed fee instead of deal with a fluctuating rate. Fixed rate bonds run between fifteen and twenty five years on average. Some people prefer fifteen year loans because they handle the higher equity and monthly payments. Short term fixed interest rate loans are ideal because the interest to be returned on the loan is lower. Theoretically banks should tailor the loans around the customer's needs and concerns. I reiterate that theoretically it would be nice. Unfortunately banks are not willing to do business this way. They will only offer bonds based on five year increments and prefer a bond somewhere in the range of fifteen to twenty five years. Individuals sometimes take a liking to bonds where the interest rate fluctuates because they can stay in close connecting with the interest payments. Some bonds begin with a fixed rate of interest over the first ten years or so. People like these bonds because they can calculate how much interest and how much interest they are paying. The homeowner may wish to request an adjustment with the interest based on the current economy. The bank is more than happy to meet this request, but will charge fees for doing so. It's worthwhile to make the request if you can afford the fees. But on the contrary, bonds will adjust to meet higher interest rates. This common up and down pattern with interest rates is something the bond holder constantly battles with. On average, people prefer fixed rate mortgages because they find them simpler and less hassle. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Graham McKenzie is the content syndication manager at BondCredit.co.za South Africans leading Bond Originator |