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Mortgage Loans - The Know-How

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Mortgage Loans - The Know-How

Last updated: September 24 2015
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  • Mortgage Loans - The Know-How

    Well, one of the most secured loans for both, the bank and the applicant, a mortgage loan is when property is used as collateral. To be precise, the loan is secured on the borrower’s property. The borrower (mortgagor) gives a lien to the lender (mortgagee) on the property that expires on the full payment of the mortgage.

    How it goes about?
    Mortgage loans are usually availed for large real estate purchases by individuals and companies alike, with a shortcoming of cash. In a way it is the borrowing of cash from a bank. Like any other loan, banks also consider the credibility of the borrower and the possibility of an untoward financial crunch in future. Hence, such loans are not always that easy to secure.

    Selecting Wisely
    Borrowers should be wise enough to assess their best chances of availing and paying off a loan given their financial conditions. There are several types of loans which are characterized by term dates which usually span from 5 to 30 years and some over zealous institutions offering a term up to 50 years. The other important aspect is the interest rate which can be either fixed or variable and the amount of payment to be made per period. One thing to understand is that such loans are subject to the prevailing market demand and hence everything pertaining to them can change to suit the market. So the interest rates may dip down or scale up from time to time.

    Refinancing
    A very prevalent term, refinancing occurs in a situation when the borrower, who had earlier signed up at a higher interest rate, wants to review the agreement and pay according to the newly dipped rates. There are boulders to jump over, but yes, it is manageable.

    Reverse mortgage.
    Ideally for older people, a reverse mortgage allows the borrower to be able to borrow against the equity of his or her hose. With such agreements the borrower receives money from the lender till the occupancy of the property and doesn’t have to pay as long as the house is occupied and he or she lives. It however becomes mandatory to keep the property in good repair. Repayment of the loan occurs in the scenario of moving out of the house, sale of the property or the death of the borrower.

    Significance of Mortgages
    To be precise mortgages enable borrowers with a cash crunch to go in for large purchases that are generally out of their reach. They enable them to pay upfront. The significance lies in the fact that mortgages make it possible for people to fulfill their dreams of owing their ideal dream homes.

    Risks Involved
    Well, in these kind of agreements, the lenders risk the fact that the borrower may not be able to pay and borrowers risk the fact that failure to pay would end up in a total loss of the asset mortgaged. Any failure to repay, allows the bank to legally foreclose the loan and put the property on auction.

    Like any other loan, mortgages are also directly related to an individual's overall capacity to return the borrowed amount.
    Talk TRUE; Talk IREF
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