Understanding the Powerful concept of Mortgage and it’s implications
The feeling of owning a house might be compared to one of life’s greatest feeling and self satisfaction along with the sense of fulfillment. Mortgage is a kind of loan concept to help us to be able to do just that we can own a house while buying it and completing the purchase as we continue to live there.
Mortgage can be defined as a kind of loan taken for the purchasing or financing of the house and real estate properties while setting the same property as collateral for the loan which should be repaid within the ( 15 – 30 Years in most cases ) mutually agreed upon time frame .
Borrower needs to repay the loan in agreed amount as monthly installments which is thoroughly discussed within certain time threshold which was initially agreed upon. It serves the purpose of being able to hold and utilize the asset while continuing to repay until the deal is complete. The repayment process is calculated according to factors such as income, interest rate and total amounts. Mortgage can also be used to refurnish property or other house or real estate related projects while conditions and repayment methods being the same.
Types of Mortgage
Adjustable-Rate Mortgage ( ARM )
It’s a type of mortgage which starts with fixed rate for an initial period then adjusts annually which can hold potential savings if rates drop resulting is savings but it’s opposite also might be the case if price spikes up because of the rising interest rates. This type of Mortgage is best suited for the short term home owners and those those experiencing income growth.
Fixed-Rate Mortgage ( FRM )
Its’ a type of mortgage whichs interest rate remains the same for the entire duration of the loan and repayment which maintains it’s predictability resulting as a Ideal mortgage payment for the long term stability though it has higher interest rates compared to adjustable loans however considering all the scenarios it can be a ideal plans for the buyers planning to stay in the home on the long run.
Government-Insured Loans
FHA Loans
Loans backed by Federal Housing Administration ( FHA ) with down payment as low as 3.5% for applicants with Mortgage Insurance Premiums ( MIP ) can be an ideal option for first time buyers with with lower credit scores.
VA Loans
Another option for Veterans and Buyers with military background could go for is government VA loan programmer which offers no down-payment or PMI but comes with limited to eligible borrowers.
USDA Loans
For buyers with low to moderate income US government offers 100% financing for rural home buyers qualified for the programme.
Conventional loans
These are the types of loans not essentially backed by the government and are divided into conforming ( meet Fannie Mae/Freddie Mac guidelines ) and non-conforming ones like for high-value properties through jumbo loans.
Interest Only Mortgage
This is the mortgage program which requires the loan bearer to pay only interest for an initial period ( 5 – 10 Years on Average ) then after completion of the payment you can move on to repay principle and interest.
Reverse Mortgage
This mortgage program allow senior citizens within or above the age of 62 or above to convert their home equity into tax-free cash whichs repayment will only be sought after the borrower’s passing, while selling the property or while moving out permanently. It’s a program aimed for elderly senior citizens to be able to benefit from their home while being able to continuously reside there.
Balloon Mortgage
This programme allows borrower to pay their mortgage payment in small amount initially for agreed upon period of time ( 5 – 7 Years on Average ) and after the end of that time the borrower must make total payment at once . This can both go very well and badly for individuals since various unexpected scenarios can play out and impact the process.
Careful Analysis
After analyzing all the available options it can be concluded that the best options can only be conclude after the full assessment of the individual’s need and situation they are in. One can use various measures to be able to not only leverage but also to reduce the load by using various approaches i.e by renting out the property to the needy tenet or by refurnishing the property and selling to be buyer for the reasonable price and many more options can be found upon careful analysis of the approach yet it may be subject to the individual’s situation and needs.
All the statistical data mentioned above were gained from
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