Mortgage notes are gaining traction because it offers win-win situation for everyone involved with it. These are also popular among investors due to lucrative returns associated with them. These mortgage notes are the determinants of mortgage loans.
Let’s go through different types of mortgage loans, which are based on the mortgage note.
Fixed-rate mortgage (FRM)
Also referred as vanilla wafer mortgage loan, a fixed-rate mortgage is a type of mortgage loan in which the rate of interest on the note does not change through the term of the loan. The borrower pays the fixed monthly payment to ensure that the full payment and interest are covered at the term’s end.
Graduated payment mortgage loan
Popularly known as GPM, it is a type of mortgage in which monthly payments increase gradually over the specified time duration. First-time home buyers prefer these types of loans to avoid heavy monthly payments.
Also referred as tracker mortgage, it is a mortgage loan in which there is periodical adjustment of interest rate on the note. The loan is generally offered at the base rate of the lender. The borrowers are able to decrease their initial payments through this form of mortgage loan if they are ready to handle the risk-related to interest rate changes.
Balloon payment mortgage
It is a type of mortgage in which a balance is left during maturity, as its full amortization does not take place. This form of mortgage is preferred more in commercial real estate market.
It is a form of loan where only the interest on the principal balance is paid by the borrower. There is no change in the principal balance in this form of loan. The borrower usually enters an interest-only mortgage during the completion of the interest-only term.
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