A
mortgage is legal agreement or contract that says that
a party has agreed to put up a property, a house or a piece of
real estate, as security to get a loan. By doing this, the
person getting a loan can buy a piece of property that he
initially cannot afford. Still, if by any chance, he cannot pay
for the loan, the bank will have to foreclose the property and
resell it to others.
The
lender will hold the title of the property until
after the full amount of the loan is paid for plus interest.
Depending on the terms of the loan, repayment can last until a
couple of years. Two of the most common mortgages in the country
are the fixed-rate mortgage and the adjustable-rate mortgage.
As shown by the name,
fixed-rate mortgage has an interest
rate that stays the same all throughout the life of the loan. If
for example the loan is termed for 10 years, then the interest
rate will stay fixed regardless of the increase or decrease of
the market rates.
With
adjustable-rate-mortgage, the interest rate can
change at the end of the pre-determined intervals. For instance,
if the agreement says interest change in periods of six months,
then the rate will assume the market rates after the six months
period. With this kind of mortgage, the borrower is left at the
mercy of the market rates. Neither the lender nor the borrower
can dictate the interest rates that will be given. Still, to
protect both the lender and the borrower, most adjustable-rate
mortgages have interest rate cap that protects them from too
much increase or decrease of interest rates.
The
balloon mortgage is another kind of mortgage, though
not quite as popular as the first two. In the balloon mortgage,
borrowers are allowed to make fixed amount payments for a
certain period of time and then make one large payment referred
to as a balloon payment towards the end of the loan. This is
actually a great deal especially if you are planning to
eventually sell off the property or to refinance it to buy
another.
The
graduated payment mortgage is also similar to the
balloon mortgage except that the borrower is not required to
make a large payment at the end of the payment period. What is
often done with graduated payment mortgage is to start off the
payments with really small amounts. The payments will then
gradually increase until they reach a point of stabilization.
Knowing how much
Americans need homes, the United States
government has enacted several government program which would
help borrowers obtain mortgages while lessening the risks for
the lenders. That way, more and more Americans will be given the
opportunity to own houses or other piece of real estate. The
Federal Housing Administration for instance offer low and
moderate-income borrowers obtain loans by giving banks and other
lending institutions protection and benefits. Borrowers can also
avail of a mortgage insurance, which would ensure that the FHA
will pay for the difference in case the house is sold for less
that it was originally worth.
Another
government agency, which provides programs for
mortgages is the Veterans Administration, which helps qualified
veterans get a loan. If in case the loan is not paid in full,
the VA will shoulder the balance of the loan.
Marvin Jones makes it easy to understand mortgages, quickly &
easily. Learn the essential keys to what you need to know about
mortgages, to receive your free information visit the
home mortgage loans
website.
About the author:
Marvin Jones is an award winning financial adviser, author and
well known speaker. He makes it easy to create and follow
financial plans. Learn the essential keys to mortgages and get
free weekly tips and how-to advice by visiting
http://www.1st-mortgage-national.info
