Mortgage Types
As part of the secured loans category, the mortgage loan is usually required when purchasing real-estate such as land or buildings. The need for such a loan is very high because it is almost impossible for someone to buy a patch of land or a house on savings alone. Some of the more important factors to be taken into account when making such a loan are the size of the loan, interest rate, maturity of the loan and the method of repaying the loan. Among the mortgage loan types that financial institutions have to offer there are:
Popular types:
The fixed-rate mortgage which has a period of time between 10 and 50 years of fixed-rates that are all amortized.
The FHA mortgages which has a small down-payment requirement, with the assurance funds given by the government.
The VA loans which is a government loan, funded by a standard lender, which can be offered only to army veterans or spouses of passed away veterans.
The interest-only mortgages. They are called “interest-only” because the borrower may choose to make an interest-only payment at some point, yet this option is only possible for a limited amount of time. On some cases thou, some mortgages are truly interest only but they need a balloon payment which means that the entire original loan needs to be returned when the loan reaches its maturity.
Hybrid types:
Option ARM mortgages. These mortgages have an adjustable rate which means that the interest rate will change over time. They also have plenty of index rates and payment choices to pick from.
Combo Mortgages. The borrower gets two loans, or two mortgages, which can be on a fixed or adjustable rate or both.
Mortgage Buydowns. This type of mortgage has a lower interest rate because the additional charges are paid by someone else than the borrower (lenders, sellers or buyers).
Special Types:
Reverse Mortgages. These are mortgages that are aimed at older people (age of 62 or more) that have equities which can be valorized into money. The lender is the one who makes regular payments to the client, with the condition that the client uses that home as his main residence and that he is still alive. This type of mortgage can have a variable or fixed interest rate.
Equity Mortgage Loans. These types of loans can be either fixed, adjustable or be used as a credit line.
Bridge Loans. If someone wants to sell his current home and buy another one, this is the type of mortgage he uses. The seller’s current house becomes collateral for the loan and the lender gives him the necessary funds to purchase another home.
Streamlined-K mortgages. These loans are provided for clients that wish to make repairs to their homes.
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