Nearly everyone who takes out a loan to purchase a property refers to the loan as a mortgage. However, a "mortgage" is simply a document that the home buyer signs and gives to the lender which pledges the property to be used as collateral until the loan is paid off. The document is then recorded in the town's land records. The two parties to a mortgage are the lender and the purchaser.
There are numerous types of mortgages that are available for people who want to purchase real estate. Mortgages can now cater to the needs of the purchaser in many ways. For example, first-time home buyers often times qualify for special loans which provide relatively low payments in the beginning years and increase over time as the buyers' income increases.
Here are some of the options available for a mortgage:
- Fixed Rate Mortgages (FRM: A mortgage in which the interest rate does not change during the entire term of the loan. This type is also called a conventional mortgage
- Adjustable Rate Mortgages (ARMS): The rates for adjustable rate mortgages constantly change depending on the national economy. ARMs usually start with better rates than fixed rate mortgages, in order to compensate the borrower for the additional risk that future interest rate fluctuations may create.
- Hybrid Combinations of FRMs and ARMs: In these mortgages, the loan can be converted from one form to another after a certain period of time.
For more information on the various types of mortgages and loan programs available to you, we recommend contacting The Mortgage Guys at Spruce Mortgage. Visit them on the web at www.vermontmortgageguys.com.
Deed of Trust
A Deed of Trust is also a document that declares the real estate property is collateral for the loan. It too is recorded in the town's land records. The three parties to a Deed of Trust are the purchaser, the lender, and the attorney or title company representing the lender.
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