A mortgage loan or a mortgage as it is commonly referred to, is a loan provided against a real property or home by banks, lenders and other financial institutions. There is a mortgage note along with every mortgage that ensures the encumbrance of the property or home against which the Mortgage is provided. There are several types of Mortgage Loans that vary based on individual requirements such as the amount of loan, the interest rate, repayment period, mode of payment and few other criterions.
The key component of a mortgage loan includes the income of an individual versus the expenses based on which the eligibility of the loan amount is calculated. Once a loan amount is sanctioned, the repayment of the loan will be linked to the amount of down payment and the monthly repayment amount based and the loan term is determined accordingly. A mortgage calculator which is easily accessible online over the internet can provide a detailed analysis of numbers based on certain parameters.
Mortgage Loans have played a significant role in transforming the housing market and have enabled a lot of people to become home owners. You can also be a proud home owner by taking advantage of the several types of mortgages available in the market. However, there is a certain amount of due-diligence that is required in analyzing the various mortgage loans and comparing them based on different parameters. A thorough evaluation of your requirements, types of mortgages and mortgage lenders is a must in order to make an informed decision.
Below is a list of different types of mortgage loans for your review:
Fixed Rate Mortgage Loan: As the name suggests, the rate of interest is fixed for the entire loan term and is agnostic to market fluctuations. However, if you opt for the fixed rate loan, the interest rate is slightly higher as the lenders would want to cover themselves from any losses they might have to incur due to volatile market fluctuations. Typically, the fixed rate mortgage loans are most suited for people opting a shorter loan term.
Adjustable Rate Mortgage Loan (ARM): The interest rates in these types of loans are adjusted as per the change in the market index such as LIBOR, CFI and CMT. The interest rates are typically lower to start off with when compared to the fixed rate loans and are prone to increase or decrease based on the index fluctuations.
Apart from these, there are other Mortgage Loans such as the Interest only mortgage loans, reverse mortgage and low interest mortgage loans. The type of mortgage loan that suits your requirement depends on whether you are a first time home buyer, your financial situation, your debt situation and affordability of monthly repayments.
Apart from identifying the right mortgage loan, identifying a right mortgage lender is also critical. You will need to approach multiple lenders to compare the deals that are offered, evaluate the competetive interest rates along with the flexibility provided in terms of repayment, amount of down payment options, etc. to ensure you get the right offer.
