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Home Mortgage Loan The Federal Savings Bank
By: The Federal Savings Bank
There are many types of mortgages used worldwide, but several factors define the characteristics of the mortgage. All of these may be subject to local regulation and legal requirements.
Some common terms used in the mortgage loan process are;
Interest: Interest may be fixed for the life of the loan or variable, and change at certain pre-defined periods; the interest rate can also, of course, be higher or lower.
Term: Mortgage loans generally have a maximum term, that is, the number of years after which an amortizing loan will be repaid. Some mortgage loans may have no amortization, or require full repayment of any remaining balance at a certain date, or even negative amortization.
Payment amount and frequency: The amount paid per period and the frequency of payments; in some cases, the amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.
Prepayment: Some types of mortgages may limit or restrict prepayment of all or a portion of the loan, or require payment of a penalty to the lender for prepayment.
Two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable-rate mortgage (ARM) (also known as a floating rate or variable rate mortgage). In some countries, such as the United States, fixed rate mortgages are the norm, but floating rate mortgages are relatively common. Combinations of fixed and floating rate mortgages are also common, whereby a mortgage loan will have a fixed rate for some period, for example the first five years, and vary after the end of that period.
In a fixed rate mortgage, the interest rate, remains fixed for the life, also called the or term, of the loan. In the case of an annuity repayment scheme, the periodic payment remains the same amount throughout the loan. In thecase of linear payback, the periodic payment will gradually decrease.
With an adjustable rate mortgage, the interest rate is generally fixed for a period of time; after such time it will periodically (annually or monthly) adjust up or down to some market index. Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where fixed rate funding is difficult to obtain or prohibitively expensive. Since the risk is transferred to the borrower, the initial interest rate may be, for example, 0.5% to 2% lower than the average 30-year fixed rate; the size of the price differential will be related to debt market conditions, including the yield curve.
The charge to the borrower depends upon the credit risk in addition to the interest rate risk. A mortgage origination and underwriting process involves checking credit scores, debt-to-income, down payments, and assets. Jumbo mortgages and subprime lending are not supported by government guarantees and face higher interest rates.
For a home mortgage loan The Federal Savings Bank is at the top of the class. They can find a mortgage loan program for just about any client, and get them into a new home quickly
The Federal Savings Bank https://www.thefederalsavingsbank.com
Page Updated Last on: Apr 23, 2015