A MORTGAGE is a debt instrument, a legal document that is enforceable evidence of your loan and the timely promise of your payment. On a home loan, the house will serve as your collateral that obligates the borrower to pay the debt. A mortgage is used either by individuals or businesses to make a large real estate property loan which they can pay over years with interest. However, banks can also foreclose your property in the event of failure to pay as agreed in your contract.
Before deciding on which mortgage to take, you should fully understand every detail of the mortgage. It does not necessarily mean that the cheapest mortgage rate can be the best mortgage rate for you. A mortgage can be complicated by different interest rates, ways of paying, and the charges on payment. A mortgage is how you borrow money to buy a property then you pay the interest on the loan and the loan itself. By then the property can only be declared as cleared and fully your property.
What are the different types of a mortgage?
Types of Mortgage
- repayment mortgages
- interest-only mortgages
- fixed rate mortgages
- variable rate mortgages
- Buy to Let Mortgage
This is good for a buyer that wants to be sure the house will be paid off at the end of the mortgage. The buyers will pay the debt monthly over a period of years, usually 25 years. The payment is part of the interest and part of the principal or capital amount of your loan. By the end of the period of the mortgage, you will own the property by fully paying the whole debt.
Interest only mortgages
This type of mortgage is applicable for loan borrowers who want a lower monthly payment but must be sure they can pay the whole debt by the end of the mortgage period. This is lower because you are only to pay the part of the interest every month. But before it ends you probably saved enough money to pay the whole debt by the end of the mortgage period.
Fixed rate mortgages
A fixed rate mortgage is popular for those who want to know exactly how much they will be paying over the next years. It is usually fixed for 20 or 30 years. So, whatever happens on the mortgage interest rate, either it fluctuates up or down, you will surely pay a fixed amount.
Variable rate mortgages
This type of mortgage is popular to buyers who think mortgage rates are going down but better deals are probably available elsewhere. The mortgage interest rate is only fixed for a certain period like for the first five years of mortgage period the interest is fixed and after which it will begin to change annually.
Buy to let mortgages
Buy to Let Mortgage is a type that is not allowed for first-time borrowers. This type of mortgage is for buyers who only want a property and rent it out than to live in it. The rent you will receive can partly pay for the amount you borrowed.