A mortgage loan is a kind of secured loan where an individual can Avail amount by keeping his/her asset as collateral to the lender. In other words, A mortgage is generally a loan sanctioned against an immovable asset like a house or a commercial property. The mortgagee keeps the asset as collateral till the borrower repays the total loan amount. Mortgages are a way to buy a home without having the cash upfront in hand.
Individuals and businesses make use of mortgages to buy real estate without paying the whole amount upfront. The borrower repays the mortgage loan with interest over a stated number of years till he/she own the property free and clear. Mortgages are also known as liens against property or claims on property. If the borrower stops repaying, the lender can foreclose on the property.
Types of Mortgages:
Fixed – Rate Mortgages: In fixed-rate mortgage, the interest rate remains the same for the entire term of the loan, as do the borrower’s monthly payments toward the mortgage loan that he/she took. A fixed-rate mortgage is also called a traditional mortgage.
Adjustable – Rate Mortgages: In Adjustable-rate mortgages, the interest rate is fixed for an initial term, and there after the interest may change intermittently depending on prevailing interest rates. If the initial interest rate is below market low, it is affordable for short term whereas for long term, it is less affordable with rising interest rates.
Interest-Only Loans: In these interest-only mortgages, payment-option ARMs, can include intricate repayment schedules and these types of mortgages are suited for erudite borrowers.
Reverse Mortgages: The name itself indicates these reverse mortgages are designed for homeowners 62 or older who want to convert part of the equity in their homes into cash.
These homeowners can borrow against the value of their home and take the money as a lump sum, fixed monthly payment, or line of credit. The whole mortgage loan balance becomes due if the borrower dies or moves away permanently or sells the home.
Benefits of Mortgage Loans:
- One can continue as the legal owner of his/her property while he/she use the funds from the loan to fulfil their needs.
- As these Mortgage loans are very secured, these can be sanctioned very easily.
- The interest on mortgage loan is lower than that a personal loan
- Easy repayable options are offered in Mortgage loans.