The word Mortgage scares a lot of people when they think about borrowing money. Though it is a very simple procedure, it is apparently complicated as our home is attached to this term. Normally, the mortgage is a legal agreement between borrowers and lenders. With the mortgage, a borrower can borrow money from any loan lending organization and give them the right to repossess his property, used as a guarantee, if he fails to pay off the loan amount.
There are various forms of mortgage. One can choose any of these forms according to his/her needs and demands. Different mortgages are Fixed rate mortgage, Variable rate mortgage, and Balloon rate mortgage.
A fixed rate mortgage is availed at a fixed rate during the mortgage period. With this kind of mortgage, you must pay a fixed monthly payment in a fixed period. So, in the future, whether interest rate rises or fall, your monthly payment will be fixed. And for this reason, this mortgage is more popular. The repayment period of fixed rate mortgage varies from 3 years to 25 years.
Whereas, a variable rate of mortgage has a fixed rate of interest for a fixed period that is bound to change in the future. A variable interest rate mortgage is also known as an adjustable rate mortgage. As variable interest rate mortgage is available at a lower interest rate than fixed rate mortgage, so they are appropriate for a short-term period where you where you will get the benefit of lower monthly payments.
As the name refers, balloon rate mortgage is a singular form of a mortgage. This mortgage is given with a fixed rate of interest and a fixed monthly payment for a predestined time. The balance amount of the loan needs to be paid off totally at the specific time. Many features of a fixed rate of mortgage and variable rate of mortgage are also seen in balloon rate mortgage. The interest rate on this mortgage will be fixed for a specific period that could be ranged from 5 to 7 years. One can pay-off the amount till 30 years. But, if someone fails to repay the amount by the end of the period, then lenders will decide that how he can pay-off the amount.
In the end, the value of the property decides the amount that a borrower can avail as a mortgage. There are some expert advice and service are provided by mortgage brokers that will help you to grab the best deal in a minimum time. You can try a lot of financing options such as traditional mortgage lenders, banks, and financial institutions.