The most common mortgages at a glance
“Certainly the hypotheker” is the well-known phrase from the advertising. Most people who buy a house in their life have to take out a mortgage because the amount is simply too high to pay at once. That is not a disaster, to take out such a loan, but many people also have no idea what they actually start when they ask for a mortgage. An interesting topic within the mortgage world is: What types of mortgages are there and what is the best for me? Every situation is one in itself and that is why it is difficult for a bank to estimate what the best mortgage is for you. Many people do not know very much about mortgages and what types there are, so below we put a number of well-known mortgages with descriptions among themselves.
You repay the entire mortgage loan during the term. As long as the mortgage interest rate does not change, you pay a fixed monthly amount to the bank, this is called annuity. That fixed amount consists of a part interest and a part repayment. The ratio between those parts varies during the term. In the beginning you pay little off on the amount and you pay more interest. At the end of the term you pay off more. The mortgage is repaid anyway at the end of the term.
With a linear mortgage you pay a monthly installment and a partial interest. The repayment is the same every month and the term of the loan is, for example, thirty years (360 months), then you repay 1/360th of the mortgage debt each month. This reduces the mortgage debt in a straight line and is therefore called linear. As with an annuity mortgage, the mortgage is at least redeemed at the end of the term.
A savings mortgage is a loan that is combined with a life insurance policy. The monthly charges consist of interest (on the mortgage amount) and the life insurance premium in addition. In the life insurance policy you always save the final capital together. You receive the same interest rate on the savings in the life insurance policy as you pay in mortgage interest. You do not repay the mortgage immediately, but only at the end.
These are three of the most common mortgages out there, and these will undoubtedly be the ones most people know best. Yet it is always wise, despite the fact that you may already have some knowledge on hold, that you first carefully look at what kind of mortgage suits you best. What is also very important is that you do not have a too high repayment per month, but too low a repayment is actually a shame. Then you pay over a longer period, which means that you pay more interest on the entire amount. Balance is really the magic word when you look for the perfect mortgage that matches your income and expenses.