The term, types of mortgage loan, refers to the various kinds of mortgage loans that are available nowadays. There are various types of mortgage loans available in the global mortgage market. However, there are some mortgage loans that are common throughout the world.
Primary Types of Mortgage Loans
The primary or the basic types of mortgage loans are those which are available everywhere. The most basic mortgage loans are the fixed rate mortgage loans and the adjustable rate mortgage loans.
Fixed Rate Mortgage Loans
The fixed rate mortgage loans are those where the rate of interest stays fixed throughout the entire duration of the mortgage loan. The biggest advantage of these loans is that the borrower is sure about his payments as a result of the fixed nature of the interest rate.
In most cases the term period of the fixed rate mortgage is thirty years. However, there are also fixed rate mortgage loans that have term periods of fifteen years. The additional costs like the insurance of the mortgage as well as the taxes on property keep changing throughout the duration of the mortgage loans.
In the United States of America the fixed rate mortgage loans are regarded as a regular form of mortgage loan.
Adjustable Rate Mortgage Loans
The adjustable rate mortgage loans are a type of mortgage loan. The adjustable rate mortgage loans are also known as variable rate mortgages or floating rate mortgage loans. In case of the adjustable rate mortgage loans the rate of interest keeps on changing throughout the loan’s tenure.
However, most of the times the rate stays fixed for a certain period in the beginning of the loan period. Thereafter, the interest rate alters on a periodic basis. Some mortgage loans are also provided with a combination of fixed and adjustable rates.
The movements of the rates of interest in an adjustable rate mortgage loan depend on a particular market index. The most prominent market indices in this context are:
London Interbank Offered Rate
Some other types of mortgage loans include the following:
Foreign National Mortgage
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Last Updated on : 1st July 2013