Choosing the right type of mortgage for you

Choosing the right type of mortgage for you

For those who are not familiar with what mortgage exactly means, it is important to know that mortgage is best described as a loan that most people take out when they want to purchase property or land. The moment people decide to invest in a house or in a piece of land but they cannot afford paying the entire sum all at once, they can opt for applying for a mortgage. However, it is recommended to look for a professional and reputable mortgage broker in order to benefit from the best results, and one broker that has made a name for herself in this industry is Eileen Crosbie. Read some useful tips below to understand how the mortgage works.

Repayment mortgages

First things first, it is important to know that the money people borrow is called the capital and the moment one borrows that money, the lender charges that person interest on it until the entire sum is repaid. Repayment mortgages imply paying the interest along with part of the capital off monthly. The moment the term comes to an end, which in most cases it is of 25 years, people should manage to finish their payments and eventually own their home.

Interest-only mortgages

These interest-only mortgages are based on the principle of paying only the interest they have been charged on the loan and not paying anything off the capital, where the capital is the amount of money you borrowed in the beginning. However, it is important to know that this type of mortgages tend to become much harder to come by, because regulators and landers aside are worried that homeowners will be left with debt that they might not be able to repay. If you choose this type of mortgage, you should think of a separate plan too regarding the way you will repay the original loan in order not to have any problems at the end of the mortgage term.

Combination of the previously two

This type of mortgage has become more and more popular in the past years. When applying for a mortgage, you can ask your lender if it is possible you can combine the two options presented above. By combining these two, you actually split your mortgage loan into an interest-only and repayment mortgage.

It is important to know these aspects the moment you apply for a mortgage. It is recommended to work with a professional broker in order to benefit from the best results.