Mortgages, probably the cheapest money in town. A mortgage is a type of loan that uses the property in which it is buying as security or collateral against the loan. Basically, a mortgage is the easiest and cheapest type of loan to get because whoever is lending you the money is really the one who is buying the house. It is not until you pay off that loan that the one actually owns his or her house.
There are many types of mortgage loans. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM)
Fixed rate mortgages are set terms that a loan is to be paid off in and at a set interest rate. This rate never changes, allowing the person taking the loan to have some peace of mind about taking it. They know that even if the mortgage interest rates rise, they will still be paying the rate at which they locked into.
Adjustable rate mortgages are still set in for a term of years but the interest fluctuates yearly based on the economy. This can be excellent if there is a period of years where the economy is prospering and the interest rates are low, than you save money. However it could go the other way as well, the choice is up to you.
The term “second mortgage” refers to taking out a loan against your house. Let’s say you owned a house for a few years and you paid $25,000 of your mortgage. You could take a second mortgage out for $25,000 meaning now you no longer own a penny of your house, but you do have 25 grand to play with. Once again, this type of loan is the cheapest loan you will ever find.
Now you may be thinking, why on earth are mortgages so cheap? There are two main reasons that can explain this; 1. Houses almost always appreciate in value, meaning every year they gain more value. Every other type of assets that one might get a loan for will depreciate in value. 2. Banks own your house till you pay back the loan, so if you cant pay back the loan they foreclose your house – kick you out – sell it for more money (appreciation value) and go about their business like nothing ever happened. Its safe, that�s all there is to it.