Have you dreamt of owning a home but you don’t have enough finances to make your dream a reality? Why don’t you apply a mortgage loan from your bank?
Securing a mortgage loan make it possible to make large purchases if you don’t have enough cash to purchase an asset just like a house.
Usually, banks offer a mortgage loan to the borrower without a guarantee that they will pay back. However risky this may sound, if a borrower fails to pay up the loan, the bank has the authority to take possession of the property. The property is then auctioned by the lender to cover for the losses in incurred.
A mortgage loan is a type of loan that use property as collateral. Securing these loans from banks will hugely depend on your credit score and your job status. These two factors are considered the main determinants before your lender approves your mortgage loan application. The loan is later repaid within a certain period of time agreeable by the two parties.
Types of Mortgages
Fixed Rate Mortgages
In fixed rate mortgages, the loan has the same interest rate throughout the repayment period. The lender does not increase the interest rate with the changes in the lending market. Supposing the agreement between the lender and the borrower was to repay the loan within a period of 20 years, the interest rate will remain fixed or constant throughout the entire 20 years. This also applies to the monthly payments the borrower pays in settlement of the loan