Mortgage Loans & Its Types

Mortgage loans are loans taken from banks, online brokers or independent mortgage brokers by pledging property owned for purchasing a residential or commercial property or to refinance a loan.

Mortgage loans are usually for a 15 or 30 year period. Mortgage payments are evened out according to the number of years, rate of interest and the type of mortgage. The property purchased is used as security or collateral to obtain the debt. If the borrower of the loan defaults on the mortgage payments the lender has the right to sell the property by employing the foreclosure process.

To be eligible for a particular loan the lender examines the employment and income generation of an individual or family to assess that monthly payment can be paid regularly by the borrower. The three important aspects that are taken into consideration to qualify for a loan are:

• Credit Score
• Monthly Income and
• Down Payment

Credit scores indicate the risk of offering a loan to a borrower. Higher the score lower the risk. Good credit scores also ensure reasonable terms of loan and lower rate of interest. Monthly income is evaluated to ensure expenses are not more than income. The amount paid as down payment reduces the risk of the lender to cover the full expense of the loan incase of default in payments.

There are different types of mortgage loans available to suit the requirements of different borrowers. Some common and popular types of mortgage loans are:

Fixed Rate Mortgages

As the name suggests such loans carry a fixed rate over the period of the loan. They are among the most popular mortgage products which are not influenced by interest rate rise or falls. The interest rates are locked and payments remain same despite rise or fall in interest rates. Fixed rate mortgages are most popular when interest rates decline.

Adjustable Rate Mortgages

Adjustable rate mortgages provide a fixed rate of interest for a specific period and thereafter resorts to an adjustable rate of interest. ARM fluctuate according to market interest rate changes after the fixed rate period is complete.

Sub-prime Mortgages

This is a mortgage scheme directed towards those who have a less than satisfactory credit score. Credit score ranges between 300-900 and a score below 620 qualify for a sub-prime mortgage. Considering that the risk is higher in lending a loan to a sub-prime borrower the monthly payments and interest rates can be high. Such loans are a profitable venture for lenders on account of earnings from pre payment penalty, interest charges or foreclosures. Prepayment penalty is a charge levied on the lender on account of paying the loan before due by either selling the property or refinancing the loan.

Jumbo Mortgage

There are specified limits to loans sanctioned to: single family, two families, three families, or four families. If your loan requirements exceed this limit you need a jumbo mortgage which charges a higher rate of interest. They are also known as non conforming loans as they exceed the limit set by Fannie Mae and Freddie Mac.

Balloon Mortgage

This type of mortgage allows borrowers a lower rate and monthly payments for a particular period. Such a period lasts for three to ten years. After the completion of the term the borrower is required to pay the principal balance as a lump sum amount. If applicable and possible the balloon mortgage can also be converted to a fixed rate or adjustable rate loan.

Home Equity Line of Credit

Popularly known as HELOCs they are variable rate mortgages in line with the prime rate. You are allowed to take credit up to your credit limit which is the maximum amount one can borrow under any plan. The interest payments are tax deductible and one can also pay previous mortgage by taking a percentage of the appraised value of the home such that the loan amount covers your previous loan balance and your current fund requirements.

The Interest-Only Mortgage

This type of mortgage requires only interest payments to be paid for a specific period of time following which the terms of the loan change and a new mortgage amount is derived. This new mortgage will be paid with principal plus interest payments for the remaining number of years.

Lendingleaders offer the lowest interest rate mortgage loans available. Choose mortgage interest rate or mortgage refinancing options that best match your situation while saving time and money.

Second Mortgage Loans
A second mortgage is a loan that is subordinate to another loan taken against the same property. They are called subordinate ...

Online Mortgage Loan Companies Are Convenient
There are many reasons to use the internet to take care of your mortgage loan needs. Online mortgage companies can give you q...

California Mortgage Refinance Loans
A California mortgage refinance loan is a good solution for those individuals in California who cannot meet their monthly mor...

When Is A Second Mortgage Loan A Good Idea?
A second mortgage loan is a loan taken after the first mortgage, with the property used in the first mortgage as collateral. ...

California Mortgage Loans
California mortgage loans help home buyers and home owners residing in California raise cash for their personal, business or ...

Florida Refinance Mortgage Loans
Refinance mortgage loans are an effective way to decrease the debt on existing loans. Whether it is a credit card debt or a d...

New Hamphire Mortgage Loan
New Hampshire mortgage loan can be organized into two types adjustable rate and fixed rates. Fixed rate mortgage (FRM), both ...

Electronic Mortgage Loans
Electronic loans, better known as E-loans, are loans that are made via the Internet. Usually the entire loan process from fin...

Mortgage Loans Explained In Plain English
With the many different kinds of mortgage loans out there, choosing the right one for your needs can be a difficult task. The...

Mortgage Loans - Types and Tips
Are you looking for a new home but confused about the mortgage loan and its types? Are you a fresher in the mortgage loan are...

What is Hybrid Mortgages/Loans?
Over the last several years consumers have started to request alternative financing to a traditional mortgage from lending co...

New Home Loan - Understand The Various Types Of Mortgage Lenders
So, youve decided to buy a house, and youre ready for that all important next stepapplying for a mortgage loan. But where sho...

Mortgage Loans
With the real estate prices sky rocketing, mortgage loans are a boon when it comes to purchasing your dream home. You can opt...

California Jumbo Mortgage Loans
California jumbo mortgage loans are very large commercial or residential mortgage loans offered by many financial institution...

An Introduction To California Home Mortgage Loans
A home mortgage is a long-term loan, usually taken for a house or a property, for a large amount. The interest rate and the b...

No Documentation Mortgage Loans - A Few Things You Must Know
No documentation mortgage loans do exist and they do provide individuals with a method of financing their home purchase. The...

2nd Mortgage Loan After Bankruptcy - Should You Get a 2nd Mortgage?
A second mortgage loan after a bankruptcy is a valid choice for some people. With your home as your collateral, a home equity...

Prevent Your Poor Credit History With Poor Credit Mortgage Loans
Poor credit mortgage loans are becoming hot favourites among people afflicting due to poor credit history. There can be numer...

Florida Commercial Mortgage Loans
Commercial mortgage loans are those taken for commercial purposes i.e. for businesses. In such loans, the business itself is ...

Second Mortgage Loans After Bankruptcy
The purpose of bankruptcy is to give the debtor a new start in his life by repaying creditors in a systematic way. Thus, bank...