All about Mortgage Loans
It is every family’s dream to have their own home, where they can create some beautiful memories, raise their kids, spend their time with their loved owns and a lot more memories and of course a place to relax in old age.
But buying a house is not a joke. Many wait for really long time to buy a house, and many others spend their lifelong savings to purchase a house and still can’t accumulate enough funds to buy their dream home. So does it mean that buying a house is next to impossible thing for many of us? No, my dear friend, that is not true. For such people there are banks and financial institutions, and these institutions have made the dream of buying a house a reality. This is been made possible with the help of mortgages and loans.
All about Mortgage Loans
In a simple term mortgage is nothing but a type of loan, which is usually taken to buy a house. In this type of a loan, the borrower gives the collaterals the house itself. After taking the collateral in form of the house, bank or mortgage broker Montreal will lend a large amount of money, which is then used by the borrower to buy the house.
This amount is then repaid by the borrower over a long period of time in form of small installments. The amount of loan and installments both are decided by the bank or the financial institution keeping in mind the repaying power of the borrower.
Mortgage loans can be of various types; like there are some which are called as “fixed rate mortgage” (FRM), where as some are variable mortgages or “Adjustable Rate Mortgage” (ARM). There are other types of mortgages too, depending on various factors. A list of all those is as follows:
- Interest: Interest rate could either be fixed for the entire life of the loan or it could be variable ad change from time to time as per the terms and conditions of the loan. In these types the interest rate could sometimes be higher or can also be lower.
- Payment: Mortgages can also be classified on the basis of its payment plan, like the payment amount and payment frequency. Payment amount and frequency is decided at the time of taking the mortgage and is an agreement between the borrower and lender. Though many institutions allow the borrower to increase or decrease the amount, if requested by the borrower.
- Term: Mortgage loans can also be classified on the basis of its duration. Though most of these loans are for a long period of time like 10 to 20 years.
- Prepayment: Few types of mortgage loans can be prepaid, without any fee, where as some have to be paid in full duration.
When one opts for the fixed rate mortgage, he or she also pays down the principal amount gradually. It is referred to as amortization. This helps those who do not have a big amount to buy a home and can pay the loan amount, small or big, gradually, as per his or her convenience till the end of the period of the loan.