WHAT IS A MORTGAGE AND ITS TYPES?

About Mortgage

 

An activity wherein an individual  borrows money from a lender for a fixed period of time to purchase a property which  becomes a collateral or security for the lender is how we define the concept of mortgage. In the light of real estate and loans, this concept can be understood that the common masses apply for. Mortgage is a term which is used in our day to day lives that is used to repay a financial obligation or a loan. 





Between loan and real estate, people often get confused. However, a mortgage process basically moves around a collateral security that is saved as a substitute for an equivalent financial value. A legal agreement is involved in it which is also known as a mortgage deed, which takes place between the mortgagee (one who borrows money) and the mortgagor (one who lends money).

 


Types of Mortgage

 

Various types of mortgage are: 

 

  1. REPAYMENT MORTGAGE

 

In the repayment mortgages, the standard concept wherein the principal amount is repaid by the mortgagee in a number of installments. In this concept, the mortgagor intends to repay the amount as decided with the mortgagor. 

 

The interest divided into a number of installments that are paid throughout the defined time period of the mortgage deed and is added to the principal amount. The property acts as a mortgage or security, until the borrowed money is paid backend and stays in possession of the mortgagor. 

 

 

  1. INTEREST-ONLY MORTGAGE

 

As compared to the first one, the second type that is interest-only mortgage is a different concept. The mortgagee pays the interest rate to the mortgagor under this concept. The interest-only mortgage involves the mortgagee paying just the interest rate and nothing else opposite to the repayment mortgage.

 

The deed dies once the mortgage deed comes to an end and the mortgagee then pays off the principal amount. The person is allowed to invest the property somewhere while the mortgagee only pays the interest over the deed. Whatever profit is gained from this investment is then collected to pay off the principal amount at the end of the deed. 

  

  1. FIXED-RATE MORTGAGE

 

The concept of fixed-rate mortgage is the 3rd type of mortgage, as the name itself suggests. Payment of the principal amount is involved along with the interest that is fixed.

 

The interest rate remains the same or fixed throughout the deed as confirmed and agreed by both the parties and perhaps the mortgagee is liable to pay the required amount on regular intervals. The interest rate which is imposed on the regular installments will remain constant or fixed throughout the duration of the deed, under the concept of fixed mortgage rate.

  

  1. VARIABLE  RATE MORTGAGE

 

From the fixed rate mortgage concept of variable rate mortgage is a bit different. The interest rate that can change from time to time is involved in the variable rate mortgage . At regular intervals, the interest rate can be changed and also on a monthly basis depending up on the mortgagor's discretion.
Location: Noida, Uttar Pradesh, India

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