A home is the most valuable asset most people will own in their lifetime. However, because a home is one of the biggest purchases people make, it is often not possible for them to buy it up front. In such situations, mortgages make buying a home possible.
A mortgage is a loan taken in return for any kind of security. As a mortgage loan is secured to purchase or construct a home, it is often referred to as a home loan. In a mortgage deal, the borrower enters into an agreement with the lender, so that the property or real estate is surety for the loan. It grants the lender the legal title to the property if the borrower doesn’t pay back the loan.
There are various types of mortgages available and the borrower must choose what will best serve their needs based on their financial condition. Fixed rate mortgages and adjustable rate mortgages are among the more common choices. Home mortgage loans are usually taken for a period of fifteen or thirty years, however, they can be negotiated for a shorter term based on the borrower’s ability to pay.
In fixed rate mortgages, the interest rate and the equitable monthly installment are always the same throughout the term of the loan. The monthly principal and interest payments also remain unchanged.
On the other hand, the interest rate and equitable monthly installment can change during the loan term of an adjustable rate mortgage. The interest payment is decided by the prime index rate. If the prime index rate goes up, the interest rate will also increase.
Both types of mortgages have benefits and drawbacks. A legal professional who specializes in real estate law can help you choose the most suitable mortgage and help you protect your interests.