Home Loan seekers have to select the type of mortgage which is most suitable to their need. This is decided based on the financial commitment they can afford. Basically there are two types of mortgages viz., Repayment mortgage and Interest Mortgages. Under repayment mortgage the debt is divided into capital repayments (repayment of borrowed money) and repayment of interest (repayment of interest on money borrowed). When the EMI (equated monthly installment) is paid every month it includes a bit of capital and a bit of interest till repayment of full debt. The interest in the early years is more than the capital. Under interest mortgage only interest portion is included in the EMI; the original money borrowed will remain there till end of the tenure of mortgage. If the original money borrowed is repaid at the end of the tenure the possession of the property mortgaged will be taken over by the banker / money lender.

Apart from the basic types of mortgage, the mortgage is further divided based on variations in the rate of interest charged on the money borrowed. These are: Fixed Rate, Variable Rate, Capped Rate, and Discounted Rate, Fix and track mortgages. Under fixed rate, the mortgage lender fixes the rate of interest for the entire period of loan. Variable Rate is the standard variable rate fixed by the mortgage lender. Capped interest rate is the combination of both fixed and variable rates. If the variable rate is higher than the fixed rate than only the fixed rate is paid and on the other hand if the variable rate falls below fixed rate than the lower rate is paid. Discounted rate is the discount offered by the mortgage lender on the standard variable interest rate. Fix and track mortgage is designed in such a way that the interest rate is fixed at the beginning and fall in to tracker later on.

Apart from the traditional mortgages, there are some other options of mortgages are available. They are Jumbo mortgage, two step mortgage, Balloon mortgage, Assumable mortgages and Construction mortgages Jumbo mortgage is normally a non conforming mortgage as it exceeds the limit. The interest rate on jumbo mortgage is always higher than the traditional mortgage. The benefit of jumbo mortgage is that property with higher value can be easily bought. Two step mortgages have both fixed interest rate at the initial period and variable interest rate afterwards. Balloon mortgage has lower interest rate at the initial period and the principal has to be paid in one lump sum at the end of the loan tenure. Assumable mortgage is done with the help of a seller. Construction mortgage is meant for new houses.

The real problem of mortgage is that there are too many numbers of mortgages. Out of the different types of mortgages, there is only one that is going to fit the requirement. On the other hand, there are so many mortgages that do not fit the requirement. Hence, choosing the right type of mortgage is the discretion of the individual.