Bonds, The two major types, and which one suits you better
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 rate bonds are popular among home owners because the rate will never change. Basically most owners do now want to do the math and sit down and constantly analyze a bond with a fluctuating interest. There is nothing wrong with that.
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.
While I mentioned earlier that most individuals are drawn to fixed rate bonds, it should also be noted that a certain group of people prefer interest rates that fluctuate. This is probably the appropriate and smart way to handle a loan. Individuals who prefer this type of bond can bend and break with the economy and enjoy more flexibility with the bank as the bond progresses.
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.
However, you also run a risk of seeing a higher interest rate with bonds that fluctuate the interest. It's one of those up and down, rollercoaster rides. Like Forrest Gump said, "you never really know what you're gonna get."
Both types of bonds offer different advantages. Generally people are inclined to stick with a fixed mortgage rate and sacrifice the chance the interest rates will drop throughout the years.
Fixed rate bonds are popular among home owners because the rate will never change. Basically most owners do now want to do the math and sit down and constantly analyze a bond with a fluctuating interest. There is nothing wrong with that.
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.
While I mentioned earlier that most individuals are drawn to fixed rate bonds, it should also be noted that a certain group of people prefer interest rates that fluctuate. This is probably the appropriate and smart way to handle a loan. Individuals who prefer this type of bond can bend and break with the economy and enjoy more flexibility with the bank as the bond progresses.
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.
However, you also run a risk of seeing a higher interest rate with bonds that fluctuate the interest. It's one of those up and down, rollercoaster rides. Like Forrest Gump said, "you never really know what you're gonna get."
Both types of bonds offer different advantages. Generally people are inclined to stick with a fixed mortgage rate and sacrifice the chance the interest rates will drop throughout the years.
About the Author:
Graham McKenzie is the content syndication manager at BondCredit.co.za South Africans leading Bond Originator
posted by Debt Consolidation Loan at
6:07 AM
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