Major Benefits of Mortgage Loans

April 17, 2012 by  Filed under: Loans 

A Mortgage Loan is a type of loan which utilizes real property as collateral or security to guarantee repayment of the loan. The mortgagor (borrower) gives the mortgagee (lender) a lien on the real estate as security for the loan. You can take advantage of Mortgage Loans from any Private Mortgage Institute or a Government Guaranteed Institute. There are different types of Loans available in the market which helps you in making significant decisions involved in financing and buying your home.

A Fixed-rate Mortgage is a fully amortizing Mortgage Loan in which the interest rate remains same through the entire loan period. Fixed-rate Loans are featured by the amount of loan, compounding frequency, and duration and interest rate. One of the chief benefits of this loan is that it offers minimum monthly payment compared to other loans. It ensures a lot of savings as the amount for this loan is fixed for the entire loan term. It is not affected with any changes in the economy.

In Adjustable-rate Mortgage (ARM) or Variable-rate Mortgage or Tracker Mortgage, the interest rates and payments are adjusted frequently based on the index reflecting the price to the mortgagee of borrowing on the credit markets. ARMs start with better rates compared to fixed-rate mortgages to compensate the mortgagor for the additional risk created by the future interest rate.

Interest only mortgage is a type of loan where the mortgagors pay only the interest on the principal balance, with the principal balance constant. It is useful for first time home buyers as it allows young people to delay large payments until there is an increase in their incomes. Interest only mortgage loans can be renewed or repaid through standard means like entering into liquidating or normal mortgage investments.

Balloon Mortgage is a loan that has similar features of Fixed-rate mortgage but extensive portion of the principal borrowed is repaid in a single payment at the end of the period of loan. Bi-monthly Mortgage is a mortgage plan where half of the monthly payment is done twice a month where as in Bi-weekly Mortgage plan the monthly payment is made for every two weeks.

Major benefit of Mortgage Loans is that there are various ways available to repay the loan. It provides the mortgagor with a facility to improve their credit rating and financial status. A Mortgage Loan has the flexibility of lowering the mortgage period so that it is possible to become debt free sooner than usual.

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