Real Estate Central

There are many types of home mortgages, each with its own unique features. It is important for someone who is seeking to take a mortgage to know about the different mortgage products available, so that they can opt for one that suits their specific financial requirements. Here is a look at what these are:

Fixed Mortgage – This is the mortgage type that most people opt for and it is quite popular and well known. Fixed rate mortgages, charge a fixed rate of interest, throughout the loan period. The loan period here is usually 15 to 30 years So, if the market changes and interest rates rise, this rise is not going to be reflected on the interest rate of this mortgage type. The advantage of taking this type of a mortgage is that there is predictability in monthly mortgage payments. Borrowers do not have to worry if they will have to pay more tomorrow because of an increase in interest rates.

Adjustable Rate Mortgage – The interest rate charged on the loan amount varies according to constantly changing market interest rates. This type of a mortgage usually offers low interest rates for a short term during the first part of a loan (1,3,5 + years) but the interest rates adjust later, meaning that the borrower may have to pay more in the future. A borrower benefits if the market interest rate drops because there interest rate may too decrease along with market rates. This type of a mortgage is ideal for those looking to pay less during the beginning of a loan.

Interest Mortgage- In this mortgage type, the borrower is only responsible for the interest on the loan. After the loan period expires, the entire loan amount has to be paid. The loan principal amount does not reduce during the loan period, unless the borrower contributes an amount towards the principal, which they have the option to do so. Interest only loans are usually refinanced within a few years and are ideal for borrowers that need a lower payment and aren’t concerned with paying a loan off.

Balloon Mortgage – In this mortgage type, the borrower has low monthly mortgage payments, throughout the loan period. At the end of the loan period, the borrower has to make a big payment on the loan, which is called the balloon payment. The interest rate charge can be fixed or floating type. The loan period is short, usually for three to five years and it is easier to qualify for such a mortgage than a fixed rate mortgage.

Graduated Payment Mortgage – In this mortgage type, the borrowers pays low monthly mortgage payment in the initial period, after which there is a gradual rise in monthly repayments. The purpose of having this benefit is to help the borrower cope with the loan payments. . Loan period is usually 15 to 30 years and in this time the first 5 to 15 years see the gradual rise in mortgage dues People ideally suited for this form of a loan are students. The initial low payment period, gives the borrower, necessary time to save money to repay the loan principal.

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Source: ArticleCube.com - Mortgages