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Mortgage loan
If you have a mortgage loan then you have a loan secured by some form of property. So if you have a house or are planning to buy one then a mortgage loan might be something interesting for you to consider.
This form of loan is a secured type and this means that you normally get a better interest rate. You get a lower interest rate because the risk for the bank is much lower than it would have been if the loan was unsecured.
If you can't pay back the loan as you should the bank will take your property as payment. The end result is that the bank always gets the money you owe them one way or another. Now let's hope that this isn't necessary! The big advantage of this type of loan is that since the loan is less risky for the bank the interest rate becomes lower and you will not have to pay as much money each month for your loan.
A mortgage loans repayment period can be a very long period of time. Everything from a few years to 30 or even more.
There's many different types of mortgage loans but four factors are basic for every type;
Interest
The interest you choose can be fixed, adjustable or some other type, for example a mix of these two. Fixed and adjustable rate are the absolutely most common types. The rate might change at previous stipulated periods. And of course the interest rate can be either higher or lower.
Fixed rate is when you decide to go with a certain rate when you take out your loan, and then use that rate for the entire period of the loan. This rate is normally a little higher than the adjustable rate available but the advantages are that you will always know what your rate is, and you will be protected from climbing rates in the future.
Adjustable rate is a rate that might change over time. Your rate is determined by the market and if the rate goes up in general, you will also get a higher rate. The best thing about adjustable rates is that you have the opportunity to save money if the rates go down.
Term
This is the length of the loan. From a few years up to quite many years (more than 30).
Payment frequency and amount
How often you have to pay the lender and how much you have to pay each time.
Prepayment
Different types of loans have different rules, some of them let you pay back the whole loan at any given time, if you would like that . Other types let you do this only with a penalty rate.