A mortgage is a type of secured loan. It is provided by most lenders and NBFCs across the country. If you own a property, it can be used as a mortgage to get a loan at the best rate. It works out to be cheaper than a personal loan. The property is used as collateral to raise the loan, and the interest rate is lower.
There are different types of mortgage loan in india. Borrowers have to choose the best mortgage for them according to their choices and needs. Let us see the types of mortgage loan available here.
List of 5 Types Of Mortgage Loan Available:
- Repayment Mortgage Loan: When you mortgage your property, you can repay the mortgage amount over the tenure of the loan. The borrower pays the monthly loan amount along with the interest. At the end of the mortgage term, the entire loan is paid off. The mortgage can have a fixed rate of interest a floating rate of interest.
- Interest-Only Mortgage: When you pay only the interest on the mortgage, it is called an interest-only mortgage. At the end of the term, you have to pay the entire amount. Only the interest on loan amount is to be paid per month. Such types of loans are paid for business investments and other investment purposes. The interest on the loan can be a fixed or floating interest.
- Second Mortgage: When a property is already under loan or mortgage, but the borrower wants an additional loan, he applies for the second mortgage. Only when the credit score of the borrower is good, he can avail the loan. The borrower pays the loan amount and interest for both the first and second loans.
- Commercial Purchase Loan: Entrepreneurs and businessmen take a loan against a commercial property that they intend to buy. Commercial property is a shop or a commercial complex or an office space. The loan amount can be used only to buy a commercial property.
- Reverse Mortgage: This loan is for senior citizens only. When people do not have a steady income but possess property, they can take a reverse mortgage. It is the lender who pays the interest to the borrower. The lender pays the monthly interest as payment to the owner of the property. The senior citizen receives the interest as EMI on the pledged property. Upon the death of the person, the property is sold by the lender. The amount already paid to him is deducted from the sale amount of the property. The legal heir gets the remaining amount of the sale amount.
Best Type of Mortgage
To choose the best mortgage, you should know how much you can afford. The tenure of the loan comes under consideration too. The loan can be for 10 or 15 or 30 years. The interest rate is another key factor to consider while choosing the right type of mortgage. When you take a repayment mortgage loan against property documents required, you will be paying the interest as well as repaying a portion of your mortgage. At the end of the tenure, you will find the entire loan has been repaid. It is better than a personal loan and cheaper. The loan is taken to meet educational expenses, weddings, medical emergencies, and business expansion.
A repayment mortgage is best as you can pay off the entire amount over a long duration of time. You get more time to repay the amount. The duration period can be paid off by 30 years too. You will pay back the entire amount of the loan by the end of the tenure easily, by making monthly payments. With a fixed-rate loan, you will have to make a higher monthly payment. The variable rate amount will be less, but riskier. If you make payments regularly, it will give you a good credit score.