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What are the 7 Different Types of Mortgages?

Navigating the mortgage landscape in India can be overwhelming, especially with the variety of options available. Understanding the different types of mortgages can help you make an informed decision when purchasing property.

Here, we explore seven key types of mortgages in India, detailing their features and benefits. Looking to get a personal loan without getting a mortgage? Apply for your low interest personal loan from Airtel Finance, via the Airtel Thanks app!

1. Fixed-Rate Mortgages

A fixed-rate mortgage is one where the interest rate remains constant throughout the loan tenure. This means that your monthly instalments (EMIs) remain unchanged, providing stability and predictability in financial planning. Fixed-rate mortgages are ideal for those who prefer consistency and want to avoid the risk of fluctuating interest rates. Typically, these loans are offered for periods ranging from 5 to 20 years.


  • Predictable monthly payments
  • Protection against interest rate hikes


  • Higher initial interest rates compared to variable-rate mortgages
  • No benefit from potential rate decreases

Read more: 5 ways to save your money with a personal loan

2. Floating-Rate Mortgages

In a floating-rate mortgage, the interest rate is tied to a benchmark rate such as the Reserve Bank of India (RBI) repo rate. This means that your EMI can vary with changes in the benchmark rate. Floating-rate mortgages are attractive when interest rates are expected to decline, offering the potential for lower payments over time.


  • Lower initial interest rates compared to fixed-rate mortgages
  • Potential to benefit from falling interest rates


  • Uncertainty in monthly payments
  • Risk of increasing EMIs if interest rates rise

3. Adjustable-Rate Mortgages (ARM)

An adjustable-rate mortgage (ARM) starts with a fixed interest rate for a specific period, after which the rate adjusts periodically based on a specified index. This type of mortgage offers a blend of the predictability of a fixed rate initially and the potential savings of a floating rate later.


  • Lower fixed rates during the initial period
  • Potential for reduced interest rates over the long term


  • Rate adjustment can lead to higher EMIs after the initial fixed-rate period
  • Complexity and uncertainty in future payments

4. Reverse Mortgages

Reverse mortgages are designed for senior citizens who own a home but lack liquid cash. Under this arrangement, the homeowner receives regular payments from the lender against the value of their home, without having to sell or move out. The loan amount is typically repaid when the homeowner sells the house or passes away.


  • Provides financial support to seniors without the need to sell their home
  • No monthly repayments required


  • The loan amount may be less than the property’s market value
  • Accumulated interest can reduce the equity in the home over time

Read more: 5 things you should not do with a personal loan


5. Interest-Only Mortgages

Interest-only mortgages allow borrowers to pay only the interest for a specified period (usually 5-10 years), after which they must start repaying the principal along with the interest. This option is suitable for borrowers who expect their income to increase in the future or those who plan to refinance or sell the property before the interest-only period ends.


  • Lower monthly payments during the interest-only period
  • Greater flexibility in managing cash flow initially


  • Higher payments once the principal repayment starts
  • Increased risk if property values fall or if income does not increase as expected

6. Bridge Loans

Bridge loans are short-term loans used to “bridge” the gap between buying a new property and selling an existing one. These loans are typically for a few months to a year and carry higher interest rates due to their short duration and increased risk.


  • Provides immediate funds to purchase a new home
  • Flexibility to wait for a better sale price on the existing property


  • Higher interest rates and fees
  • Risk of holding two mortgages if the existing property does not sell as quickly as expected

Read more: What are personal loan foreclosure charges?

7. Home Construction Loans

Home construction loans are specialised loans intended for individuals who want to build their own homes rather than purchase an existing property. These loans are typically dispersed in stages, aligned with the progress of construction, and converted into a regular mortgage upon completion of the house.


  • Funds are provided as needed during construction
  • Control over the construction process and customization


  • Complex application and approval process
  • Higher interest rates during the construction phase

Choosing the right type of mortgage is crucial for your financial health and long-term goals. Whether you prefer the predictability of fixed-rate mortgages or the flexibility of floating rates, understanding the nuances of each option can help you make an informed decision. Consider your financial situation, market conditions, and future plans when selecting a mortgage, and always consult with a financial advisor or mortgage expert to navigate this important decision.


What is a Fixed-Rate Mortgage?

A Fixed-Rate Mortgage offers a stable interest rate and fixed monthly payments throughout the loan term, typically 15 to 30 years.

What is an Adjustable-Rate Mortgage (ARM)?

An Adjustable-Rate Mortgage has an interest rate that can change periodically based on market conditions after an initial fixed-rate period.

What is an Interest-Only Mortgage?

An Interest-Only Mortgage allows borrowers to pay only interest for a specified period, after which they start repaying principal along with interest.

What is a Balloon Mortgage?

A Balloon Mortgage features low initial payments for a set period, with the balance due as a lump sum (balloon payment) at the end of the term.