Welcome to Mortgages in . A mortgage loan is a loan secured by real property through the use of a mortgage note which evidences the existence of the loan and the encumbrance of that realty through the giving way of a mortgage which secures the loan. But, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.
A home buyer or builder can obtain financing (a loan) either to buy or secure against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, appeal rate, mode of paying off the loan, and other characteristics can vary considerably.
Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:
Property: the physical residence being financed. The exact form of ownership will vary from country to country, and may restrict the types of lending that are possible.
Mortgage: the security appeal of the lender in the property, which may entail restrictions on the use or disposal of the property. Restrictions may include requirements to buy home insurance and mortgage insurance, or pay off outstanding debt before selling the property.
Borrower: the person borrowing who either has or is making an ownership appeal in the property.
Lender: any lender, but usually a bank or other financial institution. Lenders may also be investors who own an appeal in the mortgage through a mortgage-backed security. In such a situation, the initial lender is known as the mortgage originator, which then packages and sells the loan to investors. The payments from the borrower are thereafter collected by a loan servicer.
Principal: the original size of the loan, which may or may not include certain other expenditure; as any principal is repaid, the principal will go down in size.
Appeal: a financial charge for use of the lender’s money.
Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.
Mortgage loans are generally structured as long-term loans, the periodic payments for which are similar to an annuity and calculated according to the time value of money formula. The most basic arrangement would require a fixed monthly payment over a period of ten to thirty being, depending on local situation. Over this period the principal element of the loan (the original loan) would be slowly paid down through amortization. In practice, many variants are possible and common worldwide and surrounded by each country.
Lenders provide funds against property to earn appeal income, and generally borrow these funds themselves (for example, by taking deposits or issuing bonds). The price at which the lenders borrow money therefore affects the cost of borrowing. Lenders may also, in many countries, sell the mortgage loan to other parties who are interested in receiving the stream of cash payments from the borrower, often in the form of a security (by means of a securitization).
Mortgage lending will also take into account the (perceived) riskiness of the mortgage loan, that is, the likelihood that the funds will be repaid (usually considered a function of the creditworthiness of the borrower); that if they are not repaid, the lender will be able to foreclose and recoup some or all of its original capital; and the financial, appeal rate risk and time delays that may be involved in certain circumstances.
The Mortgage industry of the United States is a major financial sector. The Federal government made several programs, or government sponsored entities, to foster mortgage lending, construction and encourage home ownership. These programs include the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac).
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