The term mortgage refers to a loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property serves as collateral to secure the loan. A borrower must apply for a mortgage through their preferred lender and ensure they meet several requirements, including minimum credit scores and down payments. Mortgage applications go through a rigorous underwriting process before they reach the closing phase. Mortgage types vary based on the needs of the borrower, such as conventional and fixed-rate loans.
Individuals and businesses use mortgages to buy real estate without paying the entire purchase price upfront. The borrower repays the loan plus interest over a specified number of years until they own the property free and clear. Mortgages are also known as liens against property or claims on property. If the borrower stops paying the mortgage, the lender can foreclose on the property.
Types of Mortgages
Mortgages come in a variety of forms. The most common types are 30-year and 15-year fixed-rate mortgages. Some mortgage terms are as short as five years while others can run 40 years or longer. Stretching payments over more years may reduce the monthly payment, but it also increases the total amount of interest the borrower pays over the life of the loan.
The following are just a few examples of some of the most popular types of mortgage loans available to borrowers.
In real estate investing, below are some of the options you may choose from:
Now that you know the different mortgage options, you can select the loan that suits your situation the best. For more insight, you may get in touch with us and we shall respond right away.