Factors That Determine The Type Of Mortgage That You Get
There are many different types of mortgages used worldwide, but several factors broadly define the different characteristics of the mortgage. All of these may be subject to local regulations and legal requirements. Interest: Interest may be fixed for the life of the loan or variable, and change at certain pre-defined periods; the interest rate can also, of course, be higher or lower. Term: Mortgage loans generally have a maximum term, that is, the number of years after which an amortizing loan will be repaid.
The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable-rate mortgage (ARM), also known as a floating rate or variable rate mortgage. In some countries, such as the United States, fixed rate mortgages are the norm, but floating rate mortgages are relatively common. In a fixed rate mortgage, the interest rate, and periodic payment, remains fixed for the life of the loan. Therefore the payment is fixed, although ancillary costs (such as property taxes and insurance) can and do change.