Traditional Types Of Mortgages – A New York Mortgage Broker’s Guide

Mortgage is an industry in itself. Almost every person across the world who owns or is planning to own their own home or property is affected by the laws and regulations that are applicable to this type of commercial transactions. It is also fact that the masses are able to afford home ownership only because of the existence of legal mortgages in the economic system and due to the help of the banks that are willing to offer them loans to make the purchases.

This is why everyone should be well aware of what exactly mortgages are and the different types of mortgages that are prevalent and accepted in the economy. This knowledge will come in handy when you yourself will be purchasing your first home. That is why I decided to put together this New York mortgage broker’s guide to everything about this transaction. Let us begin..

In its simplest form, a mortgage is an arrangement under which a borrower puts up the title to real estate as security (collateral) for a loan to buy the real estate. The borrower typically agrees to make regular payments of principal and interest to repay the loan. If at any point of time the borrower fails to meet his obligation or makes a default, the lender can foreclose on the real estate and have it sold to pay off the loan.

Now there are various types of mortgages that you can legally enter into. Some of these are more conventional formats that have been around for ages. Then there are the newer types of mortgages that have recently come up in accordance with the latest economic scenarios. In this article, you can find a simple explanation of some of the traditional mortgage deals that are common on the US economic system.

Conventional mortgages

In this type of mortgage transaction part of each month's payment goes towards paying off the principal and part goes toward interest. These are the most common format of this type of financial transactions and have been around since the time mortgages came into existence. These simple dealings have a few added attributes that then necessitate that we divide this type of mortgage into two more sub varieties. They are listed below.

Fixed Rate mortgages

In these types of conventional mortgages, the interest rate stays the same throughout the life of the loan. The interest rate is usually just a little higher than that of the 30 year Treasury Bond at the time the mortgage is issued. Each month’s mortgage repayment is equal to a part of the principal amount plus the interest rate for that month. Since a bit of the principal is paid off, then the interest payment on the remaining principal will be a little less each month.

Adjustable rate mortgages

This type of mortgage transaction became popular in 2004 when the Federal Reserve began raising the Fed funds rate. The interest rates on these transactions vary, usually with the rate on the 1-year Treasury bill. The lender has the option to let the rates adjust monthly, quarterly, annually, every 3 years or 5 years.

If you have more questions, do not forget to discuss them with your mortgage broker in New York. Or you can visit for more information.

About The Author

Miranda Jones is an expert mortgage broker in California and New York who also likes to write many informative articles to help the common people understand what this financial transaction entails along with its many salient features. She recommends as the best name to trust for these matters.

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