Over the last couple of years, interest rate on mortgage loans have been increasing gradually. Rising interest rate present a difficult situation for new Guaranteed cheap adverse credit mortgage borrowers. The dilemma is whether to opt for floating rate guaranteed cheap adverse credit mortgage or fixed rate for mortgage loan guaranteed cheap adverse loan or the hybrid loan, which is a combination of the above.
Under a fixed rate for guaranteed cheap adverse credit mortgage, the rate of interest is decided before hand, at the time of taking the loan. The rate remains the same during the life of the tenure of the guaranteed cheap adverse credit mortgage loan irrespective of the market rates of interest. In case the interest rates go down, the borrower tends to lose as he has to pay a higher interest as compared to the market rate of interest.
In case of floating guaranteed cheap adverse credit mortgage rate, the rate of interest is linked to the market rate or a benchmark rate, for example the prime lending rate of the bank. Thus a borrower floats along with the market rates of interest and has to constantly monitor the market movement of interest rates.
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Then there is the hybrid loan. These loans combine features of more than one product. Simply put, traditionally, one could opt for either a fixed rate or a floating rate one. Hybrid loans combine the features of both the loans. The variants may be different. Such loans are offered in addition to the traditional pure loan products. The borrower has a choice of which cheap guaranteed adverse credit loan he wants to opt for.
Each product introduced by the different banks has its own distinctive features. Some banks offer a certain percentage of the loan amount to be at fixed rate and the balance at the floating rate. Others offer a fixed rate of interest for the first few years and then it would be floating – depending on the market rates of interest. The interest rates will remain fixed for the first few years of the loan tenure only. After this initial period, the loan becomes a floating rate loan, and the applicable interest rates at that point of time will be applicable to the balance loan amount.
While taking an adverse credit mortgage decision, a borrower faces a dilemma – which loan to choose. Should he go in for a fixed rate loan or should he go in for a floating rate loan, or a hybrid loan. Some risk is involved in all the cases and the borrower needs to take a conscious decision after analysing some factors. One needs to analyse the general trends in the loan market or consult the guaranteed adverse credit mortgage advisors for financial guidance.
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