Types of Mortgage
Mortgage Choices One Can Make
The concept of a mortgage is not at all new in any way and when it comes to making the payments of mortgage every month the borrower has several options to go for. At numerous instances, the behavior of the borrower has been inclined towards making a little amount of payment for the initial years and a higher one at the end of the mortgage. This thought is backed by an assumption that with the passage of time sufficient finance will be available which may be used to pay off the heavy sum.
Well, every individual has a different approach to the different mortgage setups but at the same time, there are different choices available as well which are all designed to offer maximum benefit to the borrowers. It is always recommended to the borrowers to make a decision keeping in mind the keen details of every single option shall be the prior concern.
Interest Only Option of Mortgage
As the name suggests this kind of setup comprises of paying off the interest portion only for the initial tenure of the fixed term. For instance, the borrower and lender may decide the term of ten years, or five years during which the interest amount is paid only and after that tenure is being completed the rest of the principal and the interest is being adjusted.
Mortgages Based on Negative Amortization
This kind of mortgage comprises of allowing the borrower to pay off a sum of interest which is less as compared to the actual amount of interest required to be paid. However, the remaining amount of interest is then forwarded further as a deferred payment is being compiled within the principal payment. This deferred amount is then being paid timely with the principal. It also works for a fixed period for the purpose of deferring the interest.
These mortgages are also known as the graduated mortgages and have a fixed rate and a fixed schedule to be followed by the start period to the end. The borrowers and lenders entering into this kind of setup are required to follow the complete schedule without any changes.
Adjustable Rate Mortgage
As the name suggests this kind of setup depends on the adjustments to be made with the passage of time. In this case, an initial amount of payment is required to be made and once the payment has been made the temporary period for a temporary interest rate is being set. In this case, as well the deferred interest arises and this leads to being accumulated in the principal payment and paid off later on.
as these setups have their benefits similarly they also have many risks as well, at times they benefit in the relaxation of immediate hefty payments and other the other hand may turn out to be shocking for the borrowers when paying off a huge amount so, the decision has to be made in a sound manner.