When it comes to mortgage loans, there is a myriad of different options that exist, which may seem quite overwhelming, particularly for the first time home buyer. The different types of mortgages, even though there are many, will prove to be of a benefit to the prospective borrower.
Having different types of mortgage loans available will allow for a the potential borrower to find an option that best suits his/her needs. However, it is important to compare mortgages in order to find the best possible one, for some will prove to have both advantages and disadvantages, depending on types of mortgages being considered.
Though there are various kinds and types of mortgage loans, there will be those that prove to more common and certain types of mortgages will be combinations of these, or differ only in the slightest degree. Among the most popular types of mortgage loans are the fixed interest rate loan, adjustable rate mortgage, interest-only mortgage, and balloon mortgage
The fixed interest mortgage is almost self-explanatory, for in pertains to having a fixed interest throughout the duration of the loan, which typically is between fifteen and forty years. The adjustable rate mortgage is similar to the fixed interest loan, though the fixed interest rate will apply during the beginning of the loan. Over time and duration of the loan, the rates will be adjusted in accordance with the mortgage market standard.
Interest-only loans are the types of mortgages that will entail the borrower making payments solely on the interest of the loan, and not the principal amount. This is usually set for a particular period of time, usually three to ten years.
Balloon mortgage loans are a type of a fixed interest loan, though it is specified for only a period of time. After such time period, the entire balance of the principal of the loan must be paid off in one lump sum.
