What Is A Mortgage?
A mortgage refers to a borrowed amount used to buy or maintain a home, landed property, or any other piece of real estate.
The terms of this agreement require the borrower to pay the lender over time, typically in a series of payments that are made regularly and divided into the principal sum and the interest accrued.
The property itself is the collateral security for the loan, and borrowers must file applications for mortgages through their preferred lenders and ensure that the requirements, including a satisfactory credit score and down payments, are met.
Mortgages could either be of the conventional/adjustable rate or fixed rate types. The cost of financing the mortgage depends on the duration it is expected to last and the interest rates it would attract.
Individuals and business entities can purchase real estate, especially when they cannot make upfront payments by using the mortgage option.
The borrower is bound to repay the loan to cover the original sum and the interests for a fixed number of years until outright ownership of the property is achieved.
A mortgage can also be referred to as a claim on a property, and when the borrower defaults on the payment, a foreclosure can be activated by the lender.
Upon foreclosing on the property, a lender may choose to sell off the property and evict the occupants as they wish.
The mortgage process begins with the prospective home buyers scouting for homes by applying to several mortgage lenders.
The lenders, in turn, do background checks to ascertain the likelihood of the loans being repaid by the borrower. The evidence can be found in the income and investment statements, tax returns, and proof of being currently employed.
Once both parties approve the process, both parties or their representatives meet at the closing, and the down payment is made to the lender, after which ownership is transferred to the home buyer.
An individual who wishes to buy a residential property but lacks the funds to cover the full amount takes out a mortgage and spreads the payments over 40 years. They make a small down payment as specified in terms of a mortgage agreement.« Back to Glossary Index