There comes a time where we have this chance of fulfilling our dreams of buying our own home. With the help of a mortgage, buying your own home becomes more affordable and allows us to spread out the price of the property over a long period of time. Mortgages have been an essential way to help purchase properties. It allows an opening for everyone to be able to purchase their own home by identifying how much they can pay for on a term.
A mortgage is a debt instrument where the real property is secured by the lender as a collateral and the borrower is obliged to pay for a long period of time. The payment made by the borrower includes interest which covers the payment for using the lenders money. Over the years, the borrower continues to pay the amortizations and interest until eventually the lender’s ownership over the property is cleared and transferred to the borrower.
Mortgages come in two forms. First is the fixed rate mortgage where the borrower is obliged to pay a fixed interest rate over the life of the mortgage term. On the other hand, a mortgage may be in the form of adjustable-rate mortgage where the mortgage’s interest is fixed for an initial term where at the end of the initial term, succeeding interest payments will be dependent on the interest rates within the market.
Like any other loan in Singapore, an interest rate needs to be applied on the loaned amount. Mortgage rates are rates of interest charged on a mortgage. These rates can either be fixed as pre-determined by the mortgage lender or fluctuate with the market’s benchmark interest rates.
The best basis for identifying a high or a low mortgage rate is the a 10-year treasury bond yield which rises and fall with the mortgage rates. And there are instances where a mortgage is payable for 30 years, based on statistics, many mortgages are paid off or refinanced for a newer rate within 10 years.