Mortgage loans allow you to obtain the amount of money necessary to make a large investment when you do not have enough savings to meet the expense. This is what allows operations such as the purchase of a home or vehicle, gradually returning the money borrowed with added interest. Although the premise is that simple the truth is that there are several different types of loans, then we will detail what they are.
Mortgage loans according to interest rate
Mortgage loans can have different interest rates, so they could be divided according to this difference into three types : mortgages with fixed interest rates, mortgages with variable interest rates and mortgages with mixed interest rates. According to this classification the conditions will be a little different.
When it comes to fixed-rate mortgage loans , the interest rate does not vary during the entire repayment term of the mortgage. This option is recommended to be very well studied in the long term before accepting it because it usually has very high costs to offset the interest rate risk. Depending on the stability of the economy of each moment and the term you have for the mortgage may be more or less interesting.
In variable rate mortgage loans, interest varies at some point in the mortgage loan. It is the most common in our country and in most cases, it varies between the first six months and the first year and is usually greater than in the second period. The rest of the bank loan is usually fixed interest.
In mixed mortgage loans, on the other hand, the interest remains fixed for the initial period of more than one year and then is variable. Choosing between them will be more a matter of strategy and the market situation at all times.
Mortgage loans according to the type of installment
When we talk about the fee we refer to what is commonly defined as the amount of money paid each month with the loan. So you can also classify the mortgages according to the type of fee or the conditions of this depending on whether it is a constant or fixed fee, an armored fee, a final fee, a growing fee or only interest.
The constant or fixed fee is the most common mortgage payment system in our country. It consists of a part of amortization capital and another part of interest. During the first year it is characterized because more interest is paid than the amortized part, but this changes over time. It is a fairly balanced type of mortgage loan.
The armored fee is characterized by always maintaining the same amount of payment, whatever happens with interest. The only thing that happens is that if they increase or decrease, the number of terms to pay the mortgage will increase or decrease as well, but always with the same amount. It is very useful to have control over the budget for mortgage loans.
The final installment consists of saving a part of the capital (approximately 30% approximately) to pay it in the last term. The total quota ends up being smaller, but it has more interests because they apply more to the final quota. In addition, it must be taken into account that a saving exercise must be done to have that amount at the end of the deadlines.
The increasing quota, as its name suggests, is when the mortgage loan quota is growing year by year by 1 or 2% and also depending on the fluctuation of interest. The first installments will be quite low, but as the amount grows, you will notice a little more.
Mortgage loans with interest-only installments pay a fee of the least usual and probably the most peculiar. It is that, in the payment terms, only interest is paid. Thus, when they have finished, it is time to pay the total loan, or sell the house to meet the debt. It is not widely used in our country.
Factors to contemplate to choose mortgage loans
It is important to check before applying for a mortgage loan that the contracted interest will be paid. To make sure of this, you can ask the bank to simulate the expense with different interest rate increases.
The more information and advice about it, the better for your investment security . The credit institution can also tell you how much money you have the possibility to pay and how much financing you will grant.