The 4 Types of Mortgage Loans

If you are looking to buy a new home, there are many types of mortgage credits that you may be interested in which could serve this objective. Buying a property is a serious matter and it is vital to learn which one matches your needs best.

Fixed-rate mortgage

This is one of the most famous types of mortgage loans as about seventy percent of home purchases pick this option. As the name implies, the interest rate of this kind of credit is a fixed rate at the inception date and applies for the life or tenor of the mortgage credit. The clear benefit of having a fixed rate permits home buyers to manage their expenses better sine the monthly repayment of principal and interest is continue all through the mortgage loan.

Adjustable rate mortgage

This is another famous type of credit with the interest rate fixed to an index. This index is not fixed and it changes with the market rates. Whenever the market rate increases the loan repayment rate rises accordingly. Similarly, when it decreases, you will also get the advantage of paying your payment at a lower rate. To stop too much fluctuation if and when the monetary market behaves erratically, a cap will be located on such mortgage credits so as to limit these abnormal rate variations.

Balloon mortgages

Similar to the fixed rate mortgage credits, balloon mortgages have a structured and fixed repayment schedules. Similar to fixed rate mortgage credits, balloon mortgages have a fixed and structured repayment schedule. The just difference between the 2 is that this type of credits follows a much shorter credit term usually in term duration of 5 to 7 years. Once this period is done it leaves with an outstanding balance of the credit known as the balloon payment.


Interest-only mortgages are types of mortgages credits that permit borrowers more flexibility on their repayment schedule. They simply pay the loan interest for a decided period of time without adding the loan principal. This means the homeowners gets to enjoy paying lower monthly payment over a little-term duration. Anyway, once this interest-only time is period is over, payments are guessed to rise quite significantly as it now contains the principal sum of the mortgage credit.

As you can view, understanding what choices you have on the various kinds of mortgage credits is vital so that you can make a best decision. After all it is going to be a long-term commitment for you and doing some homework now helps to make owning your dream home problem-free.