People who want to raise fund for buying a house or land will always opt for the secured finance loan named as mortgage loan. Mortgage loans that can be used either for personal or commercial purpose should be repaid to the bank within a period of time. For taking a mortgage loan you need to place your asset in the bank as mortgage. Usually the legal documents of the plot or the ownership of the property that you are going to buy will be kept as the collateral against the mortgage loan. This security will provide backing for the value of the loan.
Normally mortgage loans are long term loans and are taken by middle class people especially to build a house. In this loan the financial institution from where the money was borrowed will buy the property on behalf of the person who has taken the loan. Similar to other types of loans like auto loans, the mortgage loans will possess some interest rates. Once the borrower repays the loan amount together with the interest amount to the lender in the predetermined time, (this will range from 20 to 30 years) then only he will get all the documents related to their property back. The interest rate together with the mortgage will reduce the lender’s risk.
Depending on the basic factors like interest, time periods and frequency of payment, mortgages loans are classified into many groups:
• There are mortgage loans with fixed as well as with variable interests. Usually this is termed as floating rate and fixed rate. You can choose which type of interest should be followed while applying for the loan.
• Majority of the mortgage loans are long term loans. This means that you can repay the loan within the predetermined time as per your loan agreement. But there are some other mortgage loans which will not allow paying in installments. Such loan should be closed in a fixed time with full payment at a single shot. As the time frame to repay the loans changes, interest rates will also change.
• There are some other lenders who will not allow you to repay the loan amount before the fixed time as per the loan agreement.