The basic features of a mortgage

"Mortgage"- the word baffles people when they think about borrowing money. Though it is a very

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simple procedure, but it is apparently complicated as our home is attached to this term. Through this article the reader will able to get some idea about mortgage.

Normally, mortgage is a legal agreement between borrowers and lenders. With mortgage a borrower can borrow money from any loan lending organization and give them the right to repossess his property, used as guarantee, if he fails to pay-off the loan amount.

There are various forms of mortgage. One can choose any of these forms according to his/her needs and demands. Different mortgages are-

Fixed rate mortgage
Variable rate mortgage
Balloon rate mortgage

A fixed rate mortgage is availed at a fixed rate during the mortgage period. With this kind of mortgage, you have to pay a fixed monthly payment in a fixed period of time. So, in future, whether interest rate rise or fall, your monthly ( life insurance ) payment will be fixed. And for this reason this mortgage is more popular. The repayment period of fixed rate mortgage vary from 3 years to 25 years.

Whereas, a variable rate of mortgage has fixed rate of interest for a fixed period of time that is bound to change in future. A variable interest rate mortgage is also known as adjustable rate mortgage or ARM. As variable interest rate remortgages are available with lower interest rates than fixed rate mortgages, so they are appropriate for short term period where you where you will get the benefit of lower monthly payments.

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