## Flat Rates & Reduced Interest Rates

When deciding on which mortgage product to take, the vital factor is interest rate.  However, it is not just a numbers. Sometimes, some banks or lenders can confuse you with the terms which can prompt you paying more over the life of the home loan than if you had picked a different product.

Most of the lenders will mix the terms like flat rate, Variable Rate, Fixed rate etc. But, what does it all mean? How this affect your Mortgages and What is right for you?

## Calculate Interest Rate Vs the Mortgage Product:

The principal thing to comprehend is the distinction between the manner in which the interest is worked out and how the interest rate is balanced after some time. The first is a piece of the interest estimation and the second is the hidden mortgage product – and it’s conceivable to blend and match the two.

For instance, ‘flat rate’ is an intrigue figuring, and ‘fixed rate’ is a mortgage product – so you can have a flat fixed rate, however not every single flat rate are fixed and not every fixed rate are flat! Confused?

## Flat rate vs. reduced rate – the interest calculation

Flat rate is a disentangled type of intrigue where the yearly intrigue is set toward the start of the credit dependent on the rule (or introductory measure) of the advance.

For instance, in the event that you have a mortgage for 1,000,000 AED with a flat rate of 4% the intrigue is set at 40,000 AED every year. Regardless of what year of your mortgage you are paying, whether it is the first or the fifteenth, the enthusiasm for it is 40,000 AED.

It’s the most straightforward method for seeing flat rates that makes it so pleasing to numerous borrowers.

Nonetheless, it’s the unpretentious high rate of return that makes it so pleasing to numerous lenders.

## Reduced Rate

A lessening rate of intrigue (likewise called ‘decreasing rate’) is the point at which the intrigue is recalculated toward the start of every year dependent on the present mortgage balance. A reduced rate of 6% on a mortgage of 1,000,000 AED will appear to be higher in the main year, with 60,000 AED being generated in intrigue, however in fifteen years, if a large portion of the rule has been paid by that point, the intrigue will likewise be divided and just 30,000 AED will be included that year.

## Which is better – flat or reduced rate?

For the most part it is smarter to have a reduced rate, particularly if the length of the advance is long as the decrease has more effect the more drawn out the term – something which is regularly valid for mortgages rather than different sorts of credit, for example, unbound individual advances.

Diminishing rate is likewise much better in the event that you intend to make extra installments on the mortgage, as these advantageous installments can significantly bring down the intrigue determined in later years.

A flat rate is just prevalent if the rate offered is considerably lower than similar reduced rate mortgages.

## Fixed vs. variable – the mortgage product

Your mortgage will commonly incorporate a decision among fixed and variable rates. In spite of the fact that these are additionally terms important to the intrigue, they manage the rate of intrigue itself, and not how that intrigue is applied.

A fixed rate mortgage will offer various years where the financing cost is set, and might be either flat fixed, or reduced fixed as portrayed previously.

A variable rate will portray a changing degree of intrigue, attached to inflation. Variable rate arrangements will in general consistently be a reduced rate as ascertaining flat factor rates is of little advantage and regularly very befuddling to the borrower.

We are here to help you. Flat rate is not the same as that of fixed rates. Don’t fall into easy trap while applying for Mortgages in Abu Dhabi on a low flat rate believing you are getting low interest rate.

Get expert advices on Mortgage rates in Abu Dhabi from experienced professionals.