When they hear the word “mortgage”, many people feel some sort of shiver down their spine. However, this only happens because they do not know exactly what mortgage actually means and what does it imply. Mortgage is a loan that people take out the moment they decide to purchase land or property, but they do not have enough money to pay all at once. In order to make sure you select the right type of mortgage, it is recommended to look for a professional mortgage broker online and websites such as http://www.eileencrosbie.ca/ might be a good starting point. Here are the main types of mortgages to help you get a clearer idea.
The interest-only type of mortgage
The main principle onto which these mortgages are based is paying only the interest they have been requested the moment they applied for the loan, but not paying the capital as well. In this case, the capital represents the amount of money people borrow from the bank in the beginning. However, it is worth mentioning that this interest-only mortgage has become much harder to obtain in the past years, since many lenders and regulators have started worrying that the great majority of homeowners will be left to repay a debt that they might not afford any more. For those who plan to opt for this type of mortgage, it is recommended to consider a separate plan to be able to repay the money they have originally borrowed in order to about any unpleasant situations from happening the moment the mortgage term ends.
The repayment type of mortgage
This type of repayment mortgages has become much popular in the past years. Repayment mortgages imply for the person who borrows money to repay both the interest and the capital on a monthly basis. The most common term in this case is of 25 years and the moment it ends, people should have already managed to pay it entirely and eventually own the land or the house they bought in the beginning.
Combination of repayment and interest-only mortgages
Last but not least, the third most common type of mortgage is actually a combination of the previously two mentioned above. These mortgages have gained more ground in the past decade. The moment you apply for a loan, you should ask the lender whether it is possible to combine the repayment method with the interest-only one. The main advantage of doing this way is that you can split the mortgage loan into two different repayment methods, thus making it easier for you to repay your loan.