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About Mortgage

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About Mortgage


 A Mortgage is a loan where your property or real estate is used by the lender or bank as collateral. Once the lender or bank lends you a mortgage, you make a promise to repay the home loan you have borrowed with the interest rate agreed at the time of origination. The title of the property is in the borrower’s name however the lender has a 1st lien on the title till the loan is paid off. If the borrower fails to make timely payments, the lender can foreclose on the house to recover the remaining loan amount. The lender owns the house until the loan is paid off.

How Does A Mortgage Work?

Mortgage loans are usually taken by individuals who do not have enough cash funds in hand to purchase a property. Based on the property value and a few other parameters Banks or Lenders will decide how much of the loan can be approved (Maximum up to 97.5%) and the rest will have to be the down payment made by the borrower. However, there are government loan programs as low as $100 Down Payment for 1st time home buyers. Based on personal savings and monthly income a borrower can decide which loan program they want to use for buying the property.
The major factors covering mortgages is the interest rate offered, the closing costs included by the lenders to process the loan and tenure selected to repay the loan. Interest rate is provided based on the borrower’s financial profile particularly the credit score. The better the score the better the interest rate the borrower can get. Interest is also based on the market as the interest rates may fluctuate multiple times in a day.  If the borrower purchases a property on a high-interest rate due to market fluctuation, he/she can always opt for a lower one when the market is better through a process known as refinancing.
Closing costs are also one of the major parameters in a mortgage. It is a charge by the lender on top of the mortgage loan to actually process the loan. This varies from lender to lender. Usually closing costs are added back into the loan amount; however, the borrower has an option to pay this upfront if he/she wants to. Closing costs consist of different charges like title charges, origination fees, lender charges, escrows, etc.
The borrower gets an option to select the tenure. Tenure is the time period taken to repay the loan which is agreed between the borrower and lender. Usually, the borrower gets the option to select between 5-30 years to repay the loan. The lower the tenure, the higher would be the monthly payments. Mostly borrowers select 30 years and then get the mortgage loan refinanced after a few years if he/she needs to change the tenure.

Why Is Mortgage Important?




Also, we know that being a proud owner of a home is everyone’s dream. With the help of a mortgage, anyone could make this dream come true. Mortgages help individuals purchase the property when they do not have enough capital to buy the home up front. Financial capability from the borrower provided towards the loan also helps an individual get a better mortgage loan with a low-interest rate and closing cost. Click here to know how much loan amount you can get qualified for. Property owned is the most valuable asset an individual can have. As the housing market tends to inflate every year, this type of investment is safer than any other financial investment with potentially high returns depending on the market value. Banks use the home as collateral. Failure to make the payments allows the banks/lenders legally to foreclose the property in order to cover their losses.
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