There are many people who can’t afford to buy a home without a loan from the bank. A mortgage is a loan from a bank that helps the borrower buy a property. 

If buying a home is on your agenda, financial experts reckon that 2020 looks to be a good year to do just that as mortgage interest rates are at an all-time low. 

The mortgage is actually secured by the home the borrower buys, so that if the person defaults on the mortgage loan, there is no loss to the bank really as it can simply sell the home and recoup the money. 

There are pledged asset mortgages where you can use assets as collateral on your loan, eliminating the need for a down payment.

Understand mortgage loans

A mortgage loan is quite involved and it is important to have the common types of mortgage loans explained, such as the fixed-rate mortgage and how the others all work. Mortgage loans aren’t standard. A lot depends on the type of loan you want, where you live as well as other financial circumstances. In other words, mortgages can be tailored.

As you begin your research, it pays to prepare yourself with the right information so you can have an idea of who the best mortgage lenders are and what mortgage loan to apply for. 

With each one, there is usually the down-payment, your monthly payment and the costs to get the loan as well as property taxes and other fees too.

There are Ts & Cs to be complied with

Before getting the mortgage, there are certain terms and conditions that will have to be complied with. The borrower will have a certain time span over which to pay back the loan and it will also be a certain amount. 

The terms and conditions will also specify the rate at which the interest accrues, and whether it is at a fixed or adjustable rate.

You can reduce the interest rate on your mortgage loan by paying an up-front fee. This will reduce your monthly payment. One point, in other words, will equal 1% of the cost of your mortgage. Buying a point lowers your interest rate by 0.125% and it is known as ‘buying down the rate.’ If the purchase is for your main home, the points can be tax-deductible. 

When you apply for a mortgage loan, there is a long haul ahead for you to start paying back the loan, and each month you’ll pay back a portion of the amount you borrowed as well as the interest accrued for the month.

The popular fixed-rate loan

The length of your loans will be determined by how much you pay each month. If the loan is a fixed-rate loan, the dollar amount is fixed and the monthly payments won’t change over the life of the loan. An adjustable-rate loan changes as the interest rate on the loan changes. 

In other words, the rate changes as the economy changes and the cost of borrowing money. But that’s not all either, because before you apply for a mortgage loan, you need to understand the different mortgage loans, and we look at some - 

An interest-only mortgage gives you a choice to pay only the interest portion of your monthly payment. So, in other words, you don’t make full payment, but during the first 5 or 10 years, it’s an interest-only mortgage. 

Certain groups get assistance and FHA loans, for instance, are mortgages guaranteed by the Federal Housing Administration and that also comes with mortgage insurance in case the borrower isn’t able to repay the loan.

Balloon mortgage is when you pay interest only for a certain period of time, after which the total amount is due after this initial period.