A mortgage is simply a means to obtain money for carrying out specific projects. Real estate is usually taken as collateral in a mortgage. Usually, real estate is seized by the lender when a borrower defaults on a mortgage. However, this is not the case all the time.
A mortgage term is the term over which the mortgage is executed. Mortgage term can be a fixed rate of interest, an adjustable rate of interest, or an amortization period. Fixed rate of interest refers to the rate of interest on the mortgage which remains unchanged for the entire life of the mortgaged property. Adjustable rate of interest may change according to market conditions. And, amortization period is the term over which the principal and interest of a mortgage are repaid.
In order to qualify for a mortgage, a borrower needs to furnish information about his or her credit history, income, assets, liabilities, and expenditure. Mortgage lenders may check the accuracy of these documents. The mortgagee should also furnish information about the collateral he or she possesses. The mortgagor must be able to prove that he or she will be able to repay the loan on or before the maturity date. Lenders will often require a good credit score, stable employment, and regular expenses.
Mortgage loans are categorized into two – secured and unsecured. Secured loans are for houses and residential buildings; unsecured loans are for businesses, automobiles, and consumer durables such as furniture. Mortgage rates are higher for secured loans than for unsecured loans.
Usually, mortgages are taken through a loan agreement. This is an agreement between the lender and the borrower which contains the conditions and terms of the loan, including interest rates, payments, and the names and amounts of all parties to the transaction. In certain cases, borrowers may choose to finance their purchase of a new house themselves by taking out a home equity loan. The interest rate in this case would be lower than for a mortgage because the home’s value is already greater than the amount of the loan.
Borrowers who do not own their homes can also take out mortgage loans from non-traditional sources. There are several government programs that can help people buy houses. Borrowers can also go through private lending institutions, though these options involve a greater risk of losing the property. Whatever the source, it is important to understand that mortgage loans are not free of fees. These fees could include title insurance, application and closing fees, banking charges, attorney fees, and other miscellaneous fees.