TYPES OF LOANS BY: SHAAN GILL

OPEN MORTGAGE OR VARIABLE RATE Definition-A variable rate mortgage (VRM), sometimes called a floating rate mortgage, is a mortgage where the interest rate fluctuates during your term. Pros- The rates are supposed to be lower overall unless one get unlucky and the market changes a ton and the rates go up. Cons- The problem with this type of loan is you never really know what you need to pay every single month because it changes and if it goes up to high one may not be able to pay it can that could create further problems

CLOSED MORTGAGE OR FIXED RATE Definition- The fixed rate mortgages are set by the chartered banks in relation to the yield in the bond market Pros- The pro is once a person sets the deal they know that they will pay an X amount of money of an Y amount of time with out an change Cons- The con is that one could possible face slightly higher rates since they are non changing

CONVERTIBLE MORTGAGE Definition- that gives the borrower the option to convert to a fixed-rate mortgage. Convertible ARMs are marketed as a way to avoid rising interest rates and usually include specific conditions. Pros- The pro is that the buyer can choose when to swap the a fixed mortgage so that htye avoid higher prices when they want to. Cons- A con is that they rates are typically higher than normal since you have a lot of control over the deal and they amount that you pay.

SPLIT-TERM MORTGAGE Definition-It splits the mortgage into separate terms of fixed and adjustable interest rates. Pros- It allows the buyer to choose a lot over there interest rates and allows them to pay less when there is a changing market Cons- However the rates for these mortgages tend to have a fairly high starting price.

REVERSE MORTGAGE Definition- A reverse mortgage or home equity conversion mortgage (HECM) is a special type of home loan for older homeowners (62 years or older) that requires no monthly mortgage payments. Pros- It allows one to really minimize there payments so that they hardly have to pay anything Cons- One has to be very old to be eligible for this type of mortgage.

REFINANCING Definition- The first loan is paid off, allowing the second loan to be created, instead of simply making a new mortgage and throwing out the original mortgage. Pros- refinancing can be a good way to convert a variable loan rate to a fixed, and obtain a lower interest rate. Cons- It requires people to have a higher credit score for this to work.