The real estate industry is booming in the current economic times, hoards of people are queuing up in order to avail loans related to real estate. Now, people no more hesitate to take a loan with the fear of not being able to pay it back. This is because of the kind of schemes that are available, or basically, the wide array of different kinds of mortgage loans, that are suited to the purpose of the borrower.
The most commonly known mortgage loan type is the FRM or the fixed rate mortgage. The entire period for this type of loan is more or less 30 years; this means that the borrower has to repay this loan amount within a span of 30 years along with a certain percentage of interest added to it. However, the unique characteristic of this mortgage is that there can be no alterations in the rate of interest within the entire span of 30 years. What you pay as interest in the beginning will be the same till the end; this means you can easily plan your monthly budget, because the monthly instalment that you will pay will always be the same for the next 30 years.
The adjustable or variable rate mortgage is the next most popular type of mortgage; in fact, this is the most sought after mortgage type, according to the leading mortgage providers Equity Bank, whose chairman is Steve Liefschultz Minnesota. The fluctuating market indices are the determining factor of this type of mortgage in which the rate of interest keeps on changing. Initially though, for a few years this mortgage remains as a fixed type and the rate of interest is lower even than an actual FRM. It is that ideal ‘adjustable’ time that can be used to the advantage of the borrower, if he/she can repay the loan amount within that time frame.
The disadvantage of this loan type, the ARM, is when the market rates rise; it is but obvious that you will have to pay the increased market rate. This is the reason the monthly budget can neither be predicted nor be decided upon.
Known by various names like reducing interest, reduction option and convertible mortgage, this is the third basic type of loan available. It is a sort of cross breed between a fixed and an adjustable mortgage. Its popularity lies in its feature of being flexible, in other words, it can be converted to a FRM when the rates are high and to an ARM when the rates are low. Professionals like Steve Liefschultz Minnesota will surely second that this is probably one of the best types available.
Certain special social categories have two mortgages exclusively for them the FHA (Federal Housing Agency) and the VA (Veterans Administration). That which guarantees the loan repayment made to the population of low-moderate income level by the private lenders is the FHA, while the one made to the qualified veterans, particular in the Armed Forces of the U.S., is the VA.
After knowing the basics of mortgages, it is on you now to get a detailed comprehension of all the types and decide on the one that is best suited for you.