Types of Mortgage Loans

Like any other loan, mortgage loans are different. Different mortgage loans have different characteristics. These general characteristics may vary from country to country and may be subject to local rules and regulations. Mortgage loans are categorized based on the term, interest, repayment frequency and amount of prepayment. This article highlights how mortgage loans are categorized.

Determinants of Types of Mortgage Loans


A mortgage loan can have a fixed or variable interest rate. A fixed interest rate means that the interest rate does not change for the life of the loan regardless of the market changes. A variable interest rate means that the mortgage loan interest rate can be adjusted at any time to align with the changes in the market conditions.


A mortgage loan has a maximum term. This means that the time when the loan and the interest will be fully be repaid is predetermined. However, some mortgage loans do not have amortization or even negative amortization.

Repayment amount

This is the amount that a borrower should pay at a given frequency. This amount is also referred to as an installment.

Repayment frequency

Repayment frequency is the period in which the installments should be paid. In most cases, the repayment frequency is usually monthly.

Different Types of Mortgage Loans

Fixed rate mortgage

In a fixed-rate mortgage, the interest rate of the loan does not change for the term of the loan. Generally, the interest rates do not change even if the market conditions change.

Adjustable rate mortgage

In an adjustable-rate mortgage, the interest rate is periodically adjusted upwards or downwards to adjust to the prevailing market conditions. The variation in the interest rate is done by the lender.

These are the types of mortgage loans and factors used to categorize them. Therefore, when you think about applying for a mortgage loan, you have a good knowledge of the type of mortgage loan that works for you.