6 Types of Mortgages You Can Choose From and Understanding the Differences

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When it comes to Mortgage, Finance, Loans, Investment and buying homes, there are 6 major types of mortgages every potential homeowner must look out for.

The 6 major types of mortgages are; conventional or fixed rate mortgage, Interest-only mortgage, variable rate mortgage, FHA mortgage loans, VA mortgage loans, and the Jumbo or Exotic type of mortgage.

 

#1 The Fixed Rate or Conventional Mortgage

This is one of the commonest types but it is not insured by the government. You may want to consider this mortgage because it is the most consistent as the interest is fixed.

This type of mortgage is available on a 10-40-year term with the 15 and 30-year payment terms most popular.

You will be glad to know that you should be able to enjoy the benefit of Mortgages For Less when you contact professionals in Calgary, for example, who can help you secure a mortgage loan fast, and often at the lowest interest rates around.

 

#2 Interest Only Mortgage

This is a flexible type of mortgage where you pay an interest portion of your monthly mortgage instead of the full payment. The issue here is that your monthly repayment plan will often be more manageable but you will not be reducing the amount you owe, which will have to be paid when the mortgage loan period comes to an end.

If you are considering an interest only option it is prudent to have a plan such as a savings strategy or investment source that will provide you with the capital sum you need to repay when the mortgage term comes to an end.

 

#3 Variable interest rate mortgage

The basic principle behind the variable interest rate mortgage is that interest rates are subject to change over a period of time. The current interest rate will reflect the present cost of borrowing and the performance of the economy, which influences which way interest rates are headed.

The interest rate can sometimes change at short notice and can move either up or down, depending on the base rate set by the central bank, so you need to consider whether your finances can withstand an increase in the monthly repayment figure if the base interest rate rises.

If you prefer to know how much you are going to pay each month there is always the option to find a mortgage that offers a fixed rate for a defined period of time, giving you a greater element of certainty with your finances.

 

#4 The FHA Mortgage type

The FHA mortgage type is one of the various options of special assistance mortgages, offered by the Federal Housing Authorities. This type of mortgage loan comes with a mortgage insurance policy to protect against the prospect of the borrower defaulting on the loan.

The insurance policy is a form of indemnity against the borrower’s inability to repay the mortgage loan.

In can often be the case that the down payment required is lower with this type of loan.

 

#5 The VA mortgages

This is a type of mortgage specifically designed for military veterans in India. In most cases, no down payments are required when purchasing a home, providing a way of helping veterans obtain a home loan that they might otherwise not be eligible for without a deposit.

 

#6 Jumbo or Exotic Types of Mortgages

The Jumbo mortgage loans are conventional loans with no restriction to the number and volume of loans you can take, subject to your credit status, of course.

Jumbo mortgages are quite common for people who want to buy new homes in expensive areas. The problem with this loan is that it can be very difficult to qualify for it and you will need to meet strict lending criteria to be considered a good risk for this type of loan.

One main benefit attached to this type of mortgage loan is that the interest rates can sometimes prove to more competitive if you are borrowing a larger sum of money.

In conclusion, there are a number of viable mortgage options available and that means there should be a good chance that you can find a loan that is best suited to your needs and financial circumstances.

When you consider how many different options there are when it comes to mortgage lending it can often make sense to seek out the help of a professional who understands the market and what lenders are looking for in terms of borrowing criteria.

A broker should know which type of mortgage would be most appropriate and whether you are likely to get approval for the loan once you have given them all the information they need to seek out the best deal on your behalf.

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