The best mortgage options for renters include fixed and variable rates, according to a report by Credit Karma, which said the majority of renters are looking for the best option.
The credit rating service says many renters are using these terms because they are the easiest to understand and remember.
The study, released Thursday, said the average household spends about $6,500 a year on mortgage insurance, but some of that is spent on fixed rates and some is spent in variable rates.
Credit Karma’s report said that, on average, a renter with a credit score of 8.7 out of 10 would have a mortgage of about $300,000.
The report said, however, that some renters would benefit from an additional mortgage, especially for homeowners who have been underwater for a period of time.
It said that if the homeowner had an average credit score above 8.6 out of the 10, he or she would save about $8,000 annually in interest payments.
Some people have a harder time getting their mortgage paid off, because it is so expensive, according the report.
The survey also found that some lenders offer an additional level of security, but that the most common rate for homeowners was between $350,000 and $500,000, while for renters it was between about $400,000 to $500.
The average interest rate for renters is about 3.2 percent, and for homeowners it is about 6.2 to 8.5 percent.
In most cases, homeowners have a better chance of getting a mortgage paid on time than renters.
The majority of people who use credit cards, for example, will pay more than 5 percent in interest, the report said.
For renters, the average interest is about 2.7 percent, with the average payment being about $500 a month.
For example, a homeowner who has a credit card balance of $500 could have a payment of $1,000 a month in interest if she had a balance of about one hundred thousand dollars, according Credit Karma.
The top-rated mortgage products, however are typically a combination of variable rates and fixed rates, with variable rates being much more affordable than fixed rates.
The biggest benefit of fixed rates is that they have a shorter term, said Credit Karma president and CEO Richard G. Wertheimer.
Variable rates are typically offered for 12 months or more.
Wetzel said that for the most part, renters can use these rates because they aren’t tied to any particular lender.
For some, the only option is to buy a home outright, because that is the cheapest option.
For others, they have to take out a loan to pay down their mortgage.
“The more debt you have, the higher your interest rate will be, and the higher the monthly payment,” Wetzel said.