One of the essential human needs is shelter. Everyone should have access to have a roof over their heads. Anyone would love to live in a space that can accommodate them, their families, and also those who choose to visit. Unfortunately, not all people who wish to own a home canbuy or build a house, leave alone to own a piece of land. A prospective house owner ought to possess a piece of land where he or she will construct the desired bungalow, condo, mansion,or palace. A house is an asset that requires adequate resources to put up. The amount of money that one would spend when building a house can be overwhelming, more so if the owner does not consider the vital aspects that should be in place. Most people, especially those who cannot raise the amount needed to put up a house, opt to seek financial assistance from lenders such as banks in the form of loans or mortgages.
A mortgage is a form of a loan from a bank or lender, such as Lemonade Homeowners Insurance, that helps potential homeowners to finance the purchase or overall construction of a home. Upon taking out a mortgage plan, the borrower makes a promise to the lender to repay the money that he/she had borrowed, plus an additional agreed-upon interest rate for a specified period. The lending institution uses the home as collateral in the unfortunate occurrence that the borrower fails to pay the debt, the bank will auction and take ownership of the house. Did you know that there are many different types of mortgages? The commonly used mortgage option is the Fixed Rate Mortgage. In this mortgage plan, the lender and the borrower agree on an interest rate that the lender tops on to the monthly payments for a given amount of time, which ranges from 15 years to 30 years. The shorter the loan’s term, the lower the interest rate, which means a borrower would pay much less interest over a 15-year mortgage versus a 30-year mortgage.
Other types of mortgage plans include the Variable Rate Mortgage,also known as Adjustable Rate Mortgage, whose interest rates fluctuate over the agreed period of payment. Another Mortgage option is the Interest-only mortgage.This mortgage plan gives borrowers an option to pay a much lower monthly payment for a specificperiod, after which the borrowers will need to begin paying the principal balance. Balloon Mortgage is a type if Interest-only mortgage, and it has a short repayment term of around ten years. The Balloon Mortgage often has a meager payment, sometimes interest only, but at the end of the term, the full balance is due immediately. The federal government also offers loans that are backed by government entities to encourage home-ownership. Government-backed loans are ideal for low-income prospective homeowners.
The type of mortgage plan is a vital aspect that all potential home-owners should consider. Lucky enough, there is a variety of mortgage options tailored to meet the clients’ requirements than many realize. In all cases, people should focus on the interest rates and fees while comparing prices.