Mortgage | Get Approved to Buy a Home
Have you ever wondered what mortgage is? Well, a mortgage can be said to be a debt instrument and this instrument is secured with collateral of a real estate property. The borrower is under obligation to pay back the loan with a predetermined level of payments. The mortgage is used by large business owners and individuals to make real estate purchases without having to pay the full price up front. This loan can be paid for years or even decades as long as the borrower pays interest. The property is not fully owned by the borrower until he or she pays the full debt. The mortgage can also be said to be “liens against property”. This is to say that if the borrower decides to stop paying for the mortgage fee, the lender can close the agreement and claim the property.
Forms Of Mortgage
In every residential mortgage, the buyer pledges a house he owns to the bank. In this type of mortgage, the bank has full right to the house is the buyer defaults in his payments. Mortgage can be divided into three major forms these are
- Fixed rate mortgage.
- Adjustable rate mortgage, and
- Interest only mortgage.
Mortgage Rates – Fixed Rate Mortgage
In fixed rate mortgages, the buyer continues to pay the same interest rate as long as the loan lasts. This is irrespective of the change in economic value or what so ever. Most of this fixed rate mortgages ranges between fifteen to thirty years. A fixed rate mortgage can also be called traditional mortgage.
Mortgage Rates – Adjustable Rate Mortgage
In an adjustable rate mortgage, the interest rate is only fixed for some time. This type of mortgage is fully affected by the market interest rates. The initial rate is always below the market rate which makes this type of mortgage more affordable. This does not mean that the interest rate always increases, it also decreases.
Mortgage Rates – Interest Only Mortgages
This type of mortgage system is majorly used by sophisticated borrowers. This type of mortgage system is not recommended by small home owners. In facets when shopping for mortgage, it is very advisable you use a mortgage calculator.