What is Mortgage?
A mortgage is a loan granted by a lender to a borrower to finance the purchase of a property. Mortgage loans are often used to cover the cost of buying large-ticket items such as cars or real estate. Mortgages come with an interest rate that can vary depending on the borrower's credit score and financial standing.
Types of Mortages
There are three main types of mortgages available to potential home owners: Fixed-Rate Mortgages, Adjustable-Rate Mortgages/ and Reverse Mortgages.
Fixed-Rate Mortgages offer stability as they feature an interest rate that remains consistent throughout the life of the loan, providing borrowers with predictable monthly payments.
Adjustable-Rate Mortgages feature an interest rate that periodically changes in response to market conditions, potentially leading to lower payments for the borrower over the short term but larger payments in later years.
Thirdly, Reverse Mortgages allow senior homeowners to access their home's equity with no repayment due on the loan until after the homeowner leaves the property or passes away. These mortgages provide a beneficial option for older homeowners who have limited income or have experienced drastic decreases in their retirement savings due to economic uncertainty.
Difference between mortage and loan
A loan is typically issued in order to cover short-term needs, usually at higher interest rates than what you would see with a mortgage. This is because it generally involves less paperwork and is used as bridge financing in situations like purchasing a home that hasn't gone through the closing process yet. Mortgage loans also come with different terms than traditional loans; they cover longer periods of time and have lower interest rates since they are secured by the collateral of a property such as a car or house.