Mortgage loan is a loan to finance the purchase of real estate, usually with specified payment periods and interest rates. The one giving the funding is called a mortgagee and the borrow obtaining the funding is called the mortgager. The mortgage outlines the details of the loan including total amount of funding, interest rate, length of the loan, and other factors. If the mortgagee is unable to make payments on the mortgage loan, the mortgager has the right to seize the asset.
The main types of mortage loans consist of fixed or adjustable rate loans. With a fixed rate loan, the interest remains the same throughout the duration of the loan and the monthly payments virtually never change. The most common type of fixed rate loan is a 30 year fixed rate mortgage. Adjustable rate mortgages offer a lower interest rate at the start of the loan, but later raise the interest rates substancially.
Under certain circumstances, an adjustable rate mortgage can be a smarter choice for the prospective home buyer. Some of these circumstances include expectation of a higher income in the future, high interest rates, or if the buyer does not plan to stay in the home for very long.