A mortgage is not a loan. A mortgage, or deed of trust in some states, is the security instrument that creates the lien against the real estate. The loan is created by the note, sometimes called the promissory note. A mortgage promissory note is a promise to pay.
A conventional mortgage is available if you have good credit. The interest rate is lowest with a conventional mortgage.
Most borrowers prefer a fixed-rate mortgage. But it is also possible to have an adjustable rate mortgage, a bi-weekly mortgage and a balloon mortgage.
An adjustable rate mortgage means the interest rate that the borrower pays can go up or down. It is usually fixed to a certain index, like the 10-year treasury bond index plus a certain percentage. Adjustable rate mortgages usually have a cap on the maximum annual increase and the total increase in interest rate possible. While not common in the USA, many countries, such as the UK only have adjustable rate mortgages.
A Sub-prime mortgage is available if your credit is not so good. The interest rate is higher with a sub-prime mortgage to compensate the lender for the extra risk they are taking.
The payments on a balloon mortgage are calculated as if it was going to amortize over a long period of time, like 30 years. Although an interest only mortgage is possible. But however, after perhaps 5 or 10 years the entire outstanding balance must be paid off in full.
We recommend using tested, legally binding mortgage documents if you create a mortgage either as an investor or for seller financing. The mortgages below are samples of what such mortgages look like.
The mortgage documents on this site come from the FannieMae website and are
their copyright. They have been electronically converted by us to
htm format and may contain spelling mistakes.
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