Debt is something we all want to avoid. But the reality is, one way or another, we have an obligation. It may be an unpaid student loan, a short-term loan taken during an emergency, or a mortgage we need to pay off every month. At the end of the day, we are all guilty of having a debt to clear.
A mortgage or a mortgage loan is a type of loan that is secured by pledging property. This is done by using a mortgage note which is a document that serves as evidence or proof that a particular loan exists. It also shows that the property is collateral to secure the loan.
There are many types of mortgages available. Changes to the mortgages are done to suit the needs of a particular client or an individual or company, keeping in mind their best interests. Here are 5 of the most popular mortgage loans:
This mortgage is known to be the most popular. The name itself describes this type of mortgage loan. Yes, it says 30 years of repayment of the loan with fixed rates. Individuals or companies who choose this type of mortgage, know that their interest rate will never go up or increase. At the same time, their payment to their mortgage will stay consistent as well, aside from the property tax, of course.
If you want a larger than usual, you’d go jumbo, right? The same goes for this type of mortgage. This is designed for individuals who want to receive more or larger than usual loans. Although the borrower is to receive a large loan, there are still limits, and they also require having higher than usual down payments.
This is also known as an adjustable-rate mortgage. This type of mortgage is used by individuals or people who want to buy more houses with their money. People who foresee an income increase in the next few years and believe they can repay the mortgage opt for this loan type. The mortgage loan will be reset and the rates may become higher at any point. The target clients know this when they opt for this type of mortgage. If an individual, for example, is into an ARM, they are allowed to buy and live in the house they want at a low rate. They are given a chance to refinance whenever they want.
This type of mortgage is specially designed for those who plan on moving to a house 5 to 7 years after the purchase. The term “balloon” refers to the mode of payment where the borrower enjoys low-interest rates but will have to pay the final amount when the loan or mortgage term ends. Failing which, they will have to take out another loan to refinance.
This type of mortgage applies to those individuals with low income. This mortgage allows them to pay for the interest of what they have loaned for in the first 7 to 10 years. It allows people with modest incomes to afford a home of their own and pay just for the interest, making their fees lower. When the interest-only payment period ends, the fees will increase because the individual has to pay for both the principal amount and the interest.
While we might not want a loan, the need for cash forces us to borrow. Although we try our best to stick to our budget, things sometimes get out of hand, and our expenses exceed our income. This is why we resort to taking out a loan as it can be a quick and easy process. It would also save us the trouble of having to bother someone else, which arises when you borrow from a friend. Or perhaps we want to get a house or a new car, but we can’t afford it in cash, so we go for a mortgage that would allow us to achieve our goal. Paying it off on a certain amount of time reduces the burden on the person’s pocket. Either way, it’s not wrong to take out a loan, keep in mind to make sure that you can pay it off.