What is Mortgage and Types of Mortgage loans

Mortgage means getting a loan in terms of money. People mortgage loan to buy a home, building, land etc. This loan which is provided to them helps to build their houses.

In a mortgage, there are two people i.e. one is a debtor and the other is the creditor. The debtor is the one who owns the property, while the creditor is the owner of the loan to whom the loan has to be repaid. When the mortgage is made by the creditor, the debtor gets his money in the form of the loan and promises to pay back the loan amount along with the interest to the creditor. If the debtor fails to return the loan amount along with the interest then the creditor can take back his mortgage property.

Mortgage loans are usually long-term loans whose periodic value is same as annuities value. Mortgage loans are calculated according to the time value of money formulae. In this process, the time period is fixed for like ten to thirty years. Over this period, a debtor is required to pay off his debts.

MORTGAGE UNDERWRITING: The debtor who has written an application for the mortgage if enters into final steps was then moved to a mortgage underwriter. This underwriter then confirms the financial information which is provided by the lender. Verification of the applicant’s credit history and about his employment will also be made. This verification can take a few days. During this underwriting process, it is advisable the employer maintains the same employment and not to open the new account as it may result in denial of the loan.


There are three types of mortgage loans. They are:

    1. FIXED-RATE MORTGAGES: A fixed-rate mortgage loan is the one whose interest rate remains the same throughout the entire life until the loan is repaid. These are the most common loans. These are mostly provided for home loans. The biggest advantage of this type of loan is that the homemaker knows exactly when the interest and principal payments will be made.
    2. ADJUSTABLE-RATE MORTGAGES: Adjustable mortgage rate is the one whose interest rate changes based on a specific schedule. This type of loan is considered to be riskier because the payment can change significantly.
    3. BALLOON MORTGAGE: Balloon mortgage loan is provided for a short period of time and it's very much like the fixed-rate mortgage loan. The reason why the payments are lower is that it is primarily interest that is being paid regularly.