A
Mortgage Loans is essentially money
borrowed from a bank or any other financial institution. As such, the money
borrowed has to be paid back within a stipulated period. The amount payable
carries a pre-determined interest rate. There are 3 types of mortgage loans on
the market. Most banks and lenders offer mortgage loans that belong to one of
these categories.
Mortgages generally differ, in line with
the following criteria:
- The interest rate imposed on mortgages may be fixed or variable. The loan may come with a fixed interest rate for the entire duration of the mortgage or it may come with a variable interest rate which changes at pre-defined periods
- The amortizing period of the loans also differ according to different lenders. The amortizing period in this case refers to the amount of time given to the borrower to repay the Mortgage Loans
- The payable amount and frequency with which the borrowed amount is to be repaid also differ
- A Mortgage Loan may come with prepayment options, while some limit prepayments to a given portion of the loan
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Fixed Mortgage Loan
It
is the most popular and common among the three types of mortgage loan. You take
out a Mortgage Loans with a lender
and you pay a certain repayment amount for a fixed period of time. Most people
usually choose 30 year fixed Mortgage Loans as the monthly repayment amounts are low and the interest rates
usually evens out in a 30 year period. There is also another sub-category of Mortgage Loan called adjustable rate
mortgage loan or ARM. However take note that ARM is highly fluctuating
depending on interest rates. In other words, you pay less for monthly repayment
when interest is low and pay more when interest rates is high.
Convertible Loans
Convertible
loans are becoming more popular as it allows people to keep their Mortgage Loans options open allowing
for more flexibility. If you find interest rates are too high, you can convert
to a fixed rate mortgage loan. If interest rates are low, you can also convert
to ARM based mortgage loans. There are too many varieties of convertible loans
under this category. However I list one type of convertible loans I dealt with.
The
best way to know whether you qualify or is suitable for a Mortgage Loans is to speak to a professional business consultant
before you decide to take up any mortgage offer.
