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A mortgage is a financial instrument by which an individual obtains funds to meet different financial needs. The owners of immovable properties mainly use a mortgage to secure the loan, to own a home. Lenders give a mortgage to borrowers, and they can either keep the property or sell it at the repayment time.
A mortgage loan is a contract between a borrower and a lender, which guarantees to pay a fixed monthly amount to the lender on a particular date, which is usually agreed to by both the borrower and the lender. The payment schedule varies depending upon the various mortgage schemes. This scheme has become very popular in the United States. A mortgage loan is also known as a second mortgage, third mortgage, or fourth mortgage.
House value of mortgaged property usually increases over a period of time, which makes mortgaging of property lucrative. However, mortgaging immovable property has the risk of losing the value of the property. The mortgagor should provide documentation about his income, credit record, property ownership, and other relevant information to prove his financial capability to repay the mortgage loan.
Mortgage schemes vary according to the type of loan being availed, the rate of interest and the tenure, or the repayment period for the monthly mortgage payment. Mortgages are unsecured loans that do not require any security to be provided. However, mortgage lenders need to have a legal title to the property they offer for mortgaging; otherwise, the offer of mortgaging will not be accepted. Mortgage loans are mostly secured loans, which require borrowers to put some of their assets as security with the lender. Usually, the borrower provides a home or automobile as collateral with the promise to pay the mortgage loan in due course of time.
When the mortgaged real estate property is sold, the original lender gains from the interest he pays on the debt. Homeowners who have made the mortgage arrangements with some lenders are given tax advantages, and sometimes, these advantages also extend to those who choose to sell their home for a lump sum. Homeowners who choose to sell their homes may be offered tax breaks, including the amount to be paid in taxes to the local government, state taxes, and other incentives.
Mortgage loans are available at different rates and terms. There are different kinds of mortgage schemes, which can be chosen according to borrowers' needs. Before deciding to apply for a mortgage, borrowers should always consult a qualified financial advisor and ask about all essential details related to Mortgage loans, such as interest rates, loan amounts, terms of repayment, and the process of repaying the loan amount.