type of mortgage

There are different type of mortgage :
1 ) Fixed rate mortgage is mortgage where borrower will pay interest at initial stage and will continue for the length of loan. This loan is benefited to borrower as he has to make payment of interest at a constant rate but disadvantageous to lender as he may be get lesser rate than market rate. Therefore to avoid the risk of lender, fixed interest rate is charged with higher rate than other mortgages.
2) An adjustable-rate mortgage (ARM) provides a fixed initial interest rate and a fixed initial monthly payment for a short period of time. With an ARM, after the initial fixed period, which can be anywhere from six months to six years, both the interest rate and the monthly payments adjust on a regular basis to reflect the then-current market interest.
3) A balloon mortgage has a fixed interest rate and a fixed monthly payment, but after a fixed period of time, such as five or ten years, the whole balance of the loan becomes due at once, meaning that the buyer must either pay the balloon loan off in cash or refinance the loan at current market rates
4) A home-equity loan is usually used by homeowners to borrow some of the equity in the home. This may raise the monthly housing payment considerably. More and more lenders are offering home-equity lines of credit. The interest might be tax-deductible because the debt is secured by a home. A home-equity line of credit is a form of revolving credit secured by a home. Many lenders set the credit limit on a home-equity line by taking a percentage of the home's appraised value and subtracting from that the balance owed on the existing mortgage. In determining the credit limit, the lender will also consider other factors to determine the homeowner's ability to repay the loan. Many home-equity plans set a fixed period during which money may be borrowed. Some lenders require payment in full of any outstanding balance at the end of the period.
Home-equity lines of credit usually have variable, rather than fixed, interest rates. The variable rate must be based on a publicly available index such as the prime rate published in major daily newspapers or a U.S. Treasury bill rate. The interest rate for borrowing under the home-equity line will change in accordance with the index. Most lenders set the interest rate at the value of the index at a particular time plus a margin, such as 3 percentage points. The cost of borrowing is tied directly to the value of the index. Lenders sometimes offer a temporarily discounted interest rate for a home-equity line. This is a rate that is unusually low and that may last for a short introductory period of merely a few months.
5) A second mortgage provides a fixed amount of money that is repayable over a fixed period. In most cases, the payment schedule calls for equal payments that will pay off the entire loan within the loan period.
6) A reverse mortgage works much like a traditional mortgage, only in reverse. It allows homeowners to convert the equity in a home into cash. A reverse mortgage permits retired homeowners who own their home and have paid all of their mortgage to borrow against the value of their home. The lender pays the equity to the homeowner in either payments or a lump sum. Unlike a standard home-equity loan, no repayment is due until the home is no longer used as a principal residence, a sale of the home, or the death of the homeowner.

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