The most expensive purchase that a person will ever make in their lifetime is the purchase of house. Because houses are so expensive, very few people can pay for them outright and a mortgage will usually need to be obtained in order to carry out this transaction. There are numerous factors that need to be considered when purchasing a house or property, but unfortunately the decisions that will need to be made do not stop there. A very important choice that needs to be made is deciding on the type of mortgage that will be taken out. There are an overwhelming amount of choices available, but each of these will fall into two main categories; these are fixed rate mortgages and an adjustable rate mortgages.

A mortgage is essentially a long term loan that is taken out to pay for a property, but the payment is not made outright and instalments will have to be made by the borrower. Interest is charged by the mortgage providers, and there are a number of different ways as to how this can be paid off along with the capital debt remaining on the property.

Arguably a fixed rate mortgage is the most basic type of mortgage. Instalments on a fixed rate mortgage will be made towards the property and the interest that is owed. These instalments will usually be made every month, although changes can be made to suit you. The instalments will always be the same month after month, and as soon as your mortgage contract is finished you will own the property outright. Because of these regular payments, planning for a fixed mortgage is relatively easy. Slowly but surely you will be paying off the money towards your house and the interest that you owe. Some people like the security of a fixed rate mortgage, but at the same time it could be argued that you can get better deals by using an adjustable rate mortgage.

Adjustable rate mortgages are more complicated than fixed rate mortgages as there are often a number of variations on the basic idea behind them. Adjustable rate mortgages will often provide you with more flexibility when it comes to paying back money. Some people may be in a better situation financially one month compared to another, and so an adjustable rate mortgage caters for this. This is the basic premise of an adjustable rate mortgage and other mortgage types will be based on this idea. For example tracker, investment, offset and interest only mortgages are all differing examples of an adjustable rate mortgage. These may seem riskier when compared to a fixed rate mortgage, but they will offer some benefits to make the risks seem plausible.

In conclusion there are two main categories of mortgage; fixed rate and adjustable rate. If you value security and structured repayments then a fixed rate mortgage might be your best option. However, if you prefer flexibility and the possibility of a better deal, then you may want to consider an adjustable rate mortgage.