The modern mortgage market offers a variety of mortgage loans catering to the needs of homebuyers. The titles and details of these plans can become confusing, especially as new types are introduced continuously. You can make sense of these types of loans, however, if you understand the basic principles that govern all mortgage loans. Again, you can look to your Real Estate Professional for assistance.
Basic Principles of all Mortgage Loans
All mortgage loans have one of the following features:
As you learn more about the types of financing available, you will notice that some loans appear to have more favorable terms. That may indicate that those loans are, indeed, bargains (and it does pay to shop around), but usually it means that those loans could have some feature that is less appealing to borrowers. For example, shorter term loans often have slightly lower interest rates compared to longer term loans. However, the monthly payment for the same amount of principle may be higher because of the shorter term. Variable rate loans usually have much lower interest rates to compensate for the risk the borrower accepts that the interest rates will rise in the future.