What is Mortgage?
Mortgages are the types of loans that are insured with personal property. These are secured loan that are specifically tied to personal property, such as land, house, farm etc.. The assets are owned by the borrower in exchange for money that is paid in installments in the set time frame.
What is Loan?
A loan is a bond between a lender and borrower. The lender also called creditor and the borrower called debtor. The money lent and received in this contract is known as a loan. The initially borrowed money is called the principal.
Types of Loans
Open-End vs. Closed-End Loans
It is further divided into two main categories of loan credit. Open-end credit — it is also known as “revolving credit” — it is type of credit that can be borrowed from more than one company or individual.
It’s “open” for constant borrowing. The most familiar form of open-end credit is a credit card; let suppose someone with a $5,000 limit on a credit card can carry on to borrow from that line of credit indefinitely, provided who pays off the card monthly and hence its card’s limit never meets or exceeds, so at which position there is no more money for him to borrow. Each time card down to $0 when they pay, Then they again have $5,000 of the credit limit.
This is a form of closed-end credit when a certain amount is fully lent with a contract for repayment at a later date; It is also called Term Loan. , 000 150,000 If a person with a closed-end mortgage loan repays a debtor, 000 70,000, that does not mean that there is another $ 70,000 in $ 150,000 to borrow; It means that he is a part of the repayment of the full loan amount already received and used. If more credit is needed, he must apply for a new loan.
Types of Mortgages
Most of the home loans are fixed-rate mortgages. These are large loans that have to be repaid for 10 to 50 years – or, if possible, for a long time. They have a set, or fixed, interest rate that can only be changed by repaying the loan; Payments are equal monthly payments throughout the life of the loan, and the borrower may pay additional amounts to pay off his or her loan quickly. In these loan programs, the repayment of the loan goes to paying the interest first and then the principal.
FHA Mortgage Loans
U.S. The Federal Housing Administration (FHA) offers mortgage loans to FHA-approved lenders to high-risk borrowers. These are not loans taken from the government, but the insurance of a loan made by an independent agency such as a bank; There is a limit on how much the government can insure a loan.
FHA loans are usually offered to first-time homebuyers with low- to moderate-income and / or 20% underpaid, as well as those with poor credit history or bankruptcy. While FHA loans allow people who don’t pay down 20% to buy a home, these high-risk borrowers need to take out private mortgage insurance.