A mortgage is a form of collateral on a piece of property against which a loan is issued. The loan is supposed to be paid off in periodic installments over a specific period of time. The mortgage essentially acts as a guarantee from the borrower that he/she would pay back the money borrowed from the lender.

There are quite a number of types of mortgages that are suited for various requirements. Each has its own advantages as well as disadvantages. It is up to the borrower to choose the kind of mortgage best suited for their specific needs.

Borrowers need to have a clear understanding of what their financial capability is and what it might become in the future and choose the type of mortgage that would specifically suit their financial situation.

When the mortgage is for a shorter repayment period, the rate of interest would also be low. But anyhow, the installment amount to be paid periodically would be high.

On the other hand, when the repayment period is long, the rate of interest would be high but the periodic installment amount would be low. Therefore one needs to carefully select the type of mortgage that one would be able to pay without defaults.

Mortgages usually require the borrower to pay the installments once or twice a month. This would amount to either 12 or 24 payments a year. When the mortgage requires the borrower to pay back the entire principal amount and the interest accrued, it is known as a fully amortized mortgage. Others require that only the interest amount be paid for a specific period of time. There are other mortgages that require a specific minimum amount to be paid periodically.

Lenders basically benefit from the interest amount that they earn from the mortgage. So they expect the borrower to be paying them interest for the whole term of the mortgage period. If borrowers on the other hand wish to pay off a mortgage ahead of schedule, they normally discourage it by slapping a penalty.