Q&A: What Is The Difference Between a Fixed Rate and an Adjustable Rate Mortgage Loan?

Dining Area of Kai Villas by Clifton Homes

Mortgages are loans acquired to purchase real estate. A number of financial institutions in Ghana, such as Ghana Home Loans and banks including HFC and Ecobank offer this type of loan to individuals and companies.

Every loan comes with its repayment terms and mortgages are no different. There are a number of myths surrounding the repayment of these loans. This post seeks to dispel these myths surrounding mortgages and interest rates.

Q: Which comes first: identifying a property or speaking to a mortgage provider?

A: Either of these can be done first. You can identify a property and discuss with the owner or the real estate agent the terms of payment, before asking the mortgage provider for help. You can also speak to the mortgage provider first, who will help you identify a property.

Q: What are the documents I will need to get a mortgage?

A: You will need a personal identification card, income verification, proof of citizenship, and your credit history will be checked. If you are a Ghanaian, a mortgage provider like Ghana Home Loans will investigate your credit history themselves before granting you a loan.

Q: Can a mortgage provider fully finance the purchase of a property?

A: Yes, residents in Ghana can fully qualify for that. With Ghana Home Loans, for instance, the company can finance properties up to a $100,000 on the condition that it is the individual’s first property purchase and that this person’s gross income is not be more than $4,000 or its cedi equivalent. If this is not the case, you have to bring 80 percent of the financing yourself.

Q: How are payments made on mortgage loans?

A: Anybody who acquires a loan is expected to make monthly repayments with interests. This is deducted from the earnings of the individual. Interest rates on mortgages are between 25 and 40 percent depending on the financial institution and the credit rate.

Q: What are adjustable-rate mortgages?

A: This means the repayment can vary depending on the credit rate.

Q: What are fixed-rate mortgages?

A: Fixed rate means the repayment on your loan does not change over time, regardless of changing interest rates and the fluctuation of the economy.

Q: Who decides on the type of rate an individual needs?

A: This is determined by the mortgage provider, who will help you to decide which rate will best suit you. This depends on the credit rate at the time the loan is being acquired, as well as your income and long-term payment plan.

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