Mortgage Loan also known as mortgage is a type of lending moneyfrom a person, group of persons, company, private institute, or government in order to buy real estate, property, or fund the projects related to real estate. It is usually offered to homeless people who plan to buy a home to live. Also, these are given to commercial borrowers that require extra sum of money to purchase more space for their business. Some sort of warranty is given to the lender by the borrower and in case a borrower remains unable to pay the loan back, the lender get ownership rights of the stuff he had got security from. Moreover, Mortgage Loan has different types and some of them are given as below:
Fixed Rate Mortgage Loan:
The first type we are discussing here is the fixed rate Mortgage Loan. As the name denotes, here a fixed rate of interest is set at the start. Also, the amount paid every month as a loan payment episode is also fixed. The time in which whole loan will paid is also fixed. The time period starts from 5 years and can lasts up to 50 years, based on the conditions and amount of loan paid. The time is fixed at the start of the contract before the loan is allotted.
An advantage attached with Fixed Rate Mortgage Loan is that, borrows know the exact amount they have to pay and the exact time they have got to pay back loan amount. However, a drawback of the Fixed Rate Mortgage Loan is that in case a person remains unable to get enough money at the end of time, his whole property and belongings can be ceased. This type of loan is mainly offered for home mortgage.
Flexible Rate Mortgage Loan:
Second type of mortgage is Flexible Rate Mortgage Loan. The basic definition of Flexible Rate Mortgage Loan is that decided interest rate will be changed after a fixed time. This time is decided when the loan contract is made and is signed by the both parties, the givers and the receivers. Taking flexible rate mortgage is always riskier because the amount of payment keeps varying.
However, the amount of money that’s received in Flexible Rate Mortgage Loan is higher than you get in fixed rate Mortgage Loan. Hence when you have more money, you can purchase better buildings, in better housing societies, and can raise your way of living significantly. Moreover, large Mortgages can be adjusted for personal borrowers like who have borrowed money to buy personal home. With a change in the price of property, the amount of the loan also changes.
Balloon Mortgage Loan:
Last but not the least, we have Balloon Mortgage Loan. In this type the time period of paying back loan is extremely short and most of its conditions resemble with the Fixed Rate Mortgage Loan. Monthly installments of the Balloon Mortgage Loan are very short and these are decided at the start of contract.
Moreover, their rates or amounts don’t increase with time. Nevertheless, at the end of the mortgage period, the borrower requires to pay a huge sum in Balloon Mortgage Loan. Monthly installments are just the primary interest which you will pay every month yet the overall loan amount is pending to be paid on the specific time, when the mortgage period ends. However, if a borrower remains unable to save a sum of balloon payment, he can get in serious trouble when the loan period ends.
So, this is all about Mortgage loan its types, now you can surely decide that which loan is suitable for you according to your requirement.