Mortgage Loans

By: EconomyWatch Content   Date: 30 December 2009

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Homebuyers have a number of choices when it comes to choosing the best mortgage loans. One should choose a mortgage loan that suits one’s financial condition.

Mortgage Loans: Types

Here are some popular types of mortgage loans:

 

Self Certification Mortgage: This mortgage was initially offered only to small businesses and self-employed earners; today, however, anyone who earns money on an irregular basis can apply. This mortgage allows applicants to declare the total money they earn from employment. A self certification mortgage usually involves higher deposit (70% to 80% of the property’s value) and interest rate. A borrower must submit bank statements to the lender to qualify for a self certification loan.

 

Blanket Mortgage: A loan that is taken to buy more than one piece of property is called blanket loan. Under the “partial release clause" of this mortgage, the borrower can repay the loan partially when a piece of the secured property is sold. A blanket mortgage is very useful for real estate investors as they own many properties for which financing had been done at different times at different rates. 

 

Closed-End Mortgage: This is an agreement in a mortgage that requires the borrower not to repay the loan completely before the loan duration ends. One can obtain a closed-end mortgage at fixed or variable interest rates. Many loan agencies offer this type of mortgage at competitive rates.

 

Fixed Rate Mortgage: In this mortgage, the interest rate does not fluctuate for the whole duration of the loan. First time property buyers often prefer to take a fixed rate mortgage due to the low risk associated with it. The biggest advantage of this loan is that the borrower pays the same amount of monthly payment every month throughout the loan. The increase in interest rates in the money market does not influence a fixed rate mortgage. This enables borrowers to take sound budgeting decisions.

 

Long Term Mortgage: This type of mortgage is spread over a longer duration than a typical home loan. The duration for a long term mortgage could be more than 50 years. The main advantage of taking this mortgage is that the monthly payments are very low. A long-term loan also enables borrowers to build equity in their property.

 

 


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