The vastness of the loan market is in inexplicable by mere words and the huge number of loan options with a wide range of features makes it truly confusing for most of the people to decide, the most suitable type of loan on the basis of his/her financial situation. Before you engage yourself in the research to find out the perfect loan, it is essential to understand some basic features which are always associated with any form of mortgage loan. In this article our subject is one of the most significant features of mortgage loan, and that is the rate of interest. For calculating your premiums, you can use mortgage calculator with taxes and insurance.
Fixed Rate Loan
The term fixed rate clearly implies that the rate of interest of this particular type of loan remains unchanged during the entire tenure of repayment or loan. For example, if you take a fixed rate loan at an interest rate of eight percent for tenure of twenty years, the rate of interest will remain same. That means eight percent will be interest amount of the entire course of your loan period. The fixed rate loan is not similar in every country. In some countries, the rate of interest remains fixed for the initial few years of the tenure, and this time frame varies from bank to bank and from one country to another. Actually, the government of a nation decides the financial policies and the financial organizations of that nation comply accordingly.
Floating Rate Loan
The name of this particular type of loan is clear to understand that in this case the rate of interest is not fixed. This type of loan is also known as “Variable” or “Adjustable Rate Loan”. The value of the rate of interest of this loan type keeps on varying or getting adjusted according to the financial conditions of the market due to the performance of the economy of the country in domestic and in international level. To check repayment premium value anytime, users can choose to use mortgage calculator with taxes and insurance. Generally, the value of the rate of interest in the initial years of the tenure of floating rate loan reveals low value.