A mortgage is a category of a loan in which a person can borrow a sum of money by keeping his home as collateral. In this, a borrower signs an agreement with a lender and gets money in advance. And he is bound to payback in the form of monthly installment till the time the total repayment is complete. Usually, it is preferred by people to buy a home when they don’t have sufficient money in their hand at a given moment. There are various types of mortgages through which one could simply borrow a given amount to satisfy one’s needs.
A mortgage is a subject of risk for lenders as there is no guarantee in this whether the borrower will be able to return the funds in a stipulated time or not. But still, it is beneficial for those who can’t afford to collect enough cash to buy a house. In today’s time, every person wants to have his house as it is the high-value property which can benefit a person in the long-run. But in case, a person fails to repay the amount then the house will be seized by a lender (usually a bank) to recover the amount. Apart from mortgages, there is also a loan category called the second mortgage which is a high-risk loan to be given for a lender. However, many people have taken second mortgage in Toronto to fulfill the needs of their families. Below we have mentioned the various types of mortgages available for borrowers.
The common type of mortgages available for borrowers are fixed rate mortgages, adjustable rate mortgages, interest-only mortgages, and payment options ARMs. In the fixed rate mortgages, the interest rate is kept fixed for the lifetime of a mortgage. Usually, a period of 15 to 30 years is selected to repay the amount to a lender. In the case of a rise in the market interest rate, the payment of a borrower does not change. However, if the market interest rate lowers down then a customer can simply refinance the mortgage loan with a new interest rate.
In the adjustable rate mortgage, the interest rate is only fixed for an initial period and then it is susceptible to change according to the market’s conditions. Under this category, a mortgage becomes more affordable in the initial time period due to low initial interest but it would cost a lot in the later period. The monthly payments simply depend on the interest rate prevailing in the market. Hence, this type of mortgages could either cost less or more, depending on the market interest rate.