When shopping for a particular type of home loan, choose that can suit your personal needs. However, there are some things you need to understand here.
First, you should understand your actual financial state. The home you are going to buy is for short term or long term stay? How would you continue repayment without sufficient funds? Most importantly, what are those mortgage options that could meet your need?
Here are some common types of mortgages you need to study to pick up a right one for your need.
This type of housing finance is for those who do not want change in home loan rate. This remains fixed for entire term of the finance. However, rate changes only when your lender does not have any option to sync with market.
Adjustable rate mortgage
If you want to seek a home loan on this term, the rate of interest on your finance will be adjusted periodically by the lender. According to this, you need to pay off very lower installment monthly to your lender in the beginning. However, the monthly installment repayment will be higher, if your lender adjusts the rate. This means, you would end up paying huge installment at the end of the loan term.
Balloon payment mortgage
This is a fixed rate home loan. It is usually offered for a short term to borrowers. The monthly installment continues for a certain period of time. Initially, the borrower needs to pay off smaller monthly installment. Large payment follows in due course of time.
This type of mortgage is used to purchase real properties. So, it is useful for builders and developers. They use to buy a large piece of lands for their commercial sale.
Also known as caveat loan, bridge loan is a short term interim financing. The repayment period of the finance ranges from 14 days to 36 months. The rate of interest is higher. Hence it is very expensive than the conventional financings.
Interest only mortgage
This is very cheap and affordable mortgage to choose. You do not need to pay off entire capital of your housing loan. Borrowers need to pay for interest rate only on principal loan amount. However, when the mortgage term expires, you need to pay large sum of money including dues payment and interest rate.
This type of housing loan is beneficial for homeowners. You can mortgage your property/home with a bank. In return, the bank will pay you a regular payment and allow you stay in till your death. After you die, the property is sold off by the bank to recover the loan amounts owed to you.