Mortgage Types Explained – Complete Guide

Mortgage Types Explained – Complete Guide


A mortgage is an arrangement in which a person provides or keeps their immovable property as security for a loan. A mortgage lender or a bank generally provides this type of loan. But the loan should be paid back on time to regain the mortgaged immovable property.

The lender and borrower have a 50% probability of profit or gain. The lender will be unsure if the borrower can repay the money on time. And the borrower is unsure whether he can repay the amount.

On-time to get his property back. If the borrower fails in repaying the borrowed money, it will lead their property under the full control of the lender.

Types of mortgages

Let’s discuss the types of mortgages in detail as follows:

1. Simple mortgage – In this type of mortgage, the borrower does not provide possession of the mortgaged property but promises to repay the loan that he has borrowed from any bank or money lender.

If the borrower fails to repay the amount in the stipulated time, then the lender will have full authority over his property and can sell that property to recover his dues.

2. Usufructuary mortgage – Here, the papers regarding the property owners remain in possession of the borrower only. The mortgaged property of the borrower will given to the lender. And the lender is asked to retain the property until the borrower repays the total amount.

3. Mortgage by the conditional sale – A person can sell his property to a bank in exchange for money and has full rights to recover the same once he repays the borrowed money on the given date. The agreement should be made in written form and must be registered.

4. Fixed-rate mortgages – The money borrowers can get an established interest rate over a set term of 15, 20 or 30 years. As this type of mortgage has a fixed interest rate, the monthly payment will be higher if the borrower pays the money in a short period and vice versa.

The main advantage of this type of mortgage is the mortgage payments remain the same throughout the life of the mortgage. And no additional charges charged in the subsequent months.

5. Adjustable-rate mortgages – In this type of mortgage, the interest rate changes over the life of the loan. The interest rate not fixed; rather, it fluctuates depending on the increase in the market rates and other factors.

This will eventually lead to a change in the total monthly payment by the borrower. One risk associated with this mortgage type is that it will become difficult for the borrower to repay the debts when the interest rates increase.

6. Reverse mortgage – Here, the borrower gets the money from the lender every month as the loan amount is divided into instalments. It named, so the lender gives the money in instalments instead of giving the entire amount at a time.

7. Equitable mortgage – This type helps secure the property, mostly seen in banking mortgage loans. In this case, the money lender gets the property title deeds.


When an immovable property used as collateral to take a loan from the bank or money from a lender. It known as a mortgage. The mortgage can divided into various types based on how the borrower repays the debt either to a bank or a lender.

Every type has its advantages and disadvantages associated with it. But if the borrower repays the amount to the lender within the pre-set date and time, they can get back their mortgaged properties.

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Shivam Sharma

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