Understanding the Different Types of Mortgage
In a mortgage there is an agreement between a lender and a borrower. In this agreement, when the borrower fails to pay the money back, then the lender now has the right to take the borrower’s property away. What is usually given out in exchange for a loan is a house or any costly property. If you sign a contract then the security is your home. If loan repayments are not realized then the mortgaged item, the house, has to be given away by the borrower. When the lender takes your property, he can sell it to someone else and collect the money that was due to be paid.
There are different types of mortgages that will be discussed below.
One of the common and simplest type of mortgage is the fixed rate mortgage. In this type or mortgage, you have the same repayment amount each month for the whole term because the interest is fixed. Your debts will be cleared fast with this since you are made to pay more than you should. The minimum term for fixed rate mortgage Is 15 years and it has a maximum of 30 year term for this type of mortgage.
The adjustable rate mortgages are quite similar to the first but the interest rates might change after a certain period of time. Your monthly payments will not be the same for the whole term. These are risk types of loans since you will not be sure how much the rate fluctuation might be and how the payments might change in the coming years.
The second mortgages are those that allow you to add another property as a mortgage to borrow some more money. The lender of the second mortgage gets paid if there is any money left after repaying the first lender. You usually take these kind of loans when you need money for home improvements, higher education and other such things.
The reverse mortgage provides income to people who are generally over 62 years of age and are having enough equity in their home. The reverse mortgage is a way for retired people to generate income from. Huge amounts of money that they have spent years back on their homes are paid back.
These are the most common types of mortgages that one can apply for. Mortgage is actually a very simple idea. If you want to get something of value from the money lender, then you need to offer something valuable as security to the money lender.
You can learn more about the different types of mortgages offered by lender companies through the online sites. Everything you want to know about mortgages will be spelled out in their websites.