Mortgage Loans:

A mortgage loan is different than any other loan you will get in your lifetime.

Most mortgage loans are negotiated for a set time period of less than 10 years. They are negotiated for a single interest rate which will remain in place for the entire term of the mortgage loan. (The only exception to this would be a line of credit, in most cases. The interest rate on a line of credit may be changed over time.) Generally, you can pay off a loan in full at any time, although you may pay a penalty depending on the mortgage lender.

Most of us are familiar with this kind of loan through the purchase of our vehicles.

With mortgages, the length of the mortgage, the mortgage interest rate are negotiated separately. In this case:

1.The 'amortization' of the mortgage is the length of time it will take to pay off the mortgage

2.The term refers to the time period covered by your current mortgage contract. This is normally the length of time that you are 'locked in' to a particular interest rate and payment amount.

3.The interest rate can either be fixed or variable.

Mortgage loan types:

There are many types of mortgages used worldwide, but several factors broadly define the characteristics of the mortgage. All of these may be subject to local regulation and legal requirements.

The 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).

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