What is a Mortgage Loan?
A mortgage loan is a loan secured by real property through the use of the legal instrument of a mortgage. A home buyer or builder can get financing, through a loan, either to purchase or to secure against the property. They can obtain such financing from a financial institution either directly or indirectly through intermediaries. An example of a financial institution is a bank. Each mortgage loan can vary considerably by having different features and characteristics. Features can include the size of the loan; maturity of the loan; interest rate; method of paying off the loan; etc.
A mortgage occurs when the owner of a property pledges his interest in such as security or collateral for a loan. As with other loans, a mortgage has an interest rate that is chargeable and scheduled to be paid off in installments over a set period of time.
All types of real property can be, and they usually are, secured with a mortgage and allow an interest rate that is supposed to reflect the lender's risk. Taking out a mortgage loan is the principle means used in many countries to finance the private ownership of residential property.
Generally, mortgage loans are arranged to be long-term loans for which the periodic payments are similar to an annuity and are calculated according to the time-value of money formulae. The most simple of arrangements would entail a fixed monthly payment over a period of ten to thirty years, depending on the conditions of that local region.
Lenders provide the loan to earn interest-income, and they generally borrow these funds themselves. Therefore, the price at which the lender borrows these funds will influence the price of borrowing that they charge the borrower.
Natacha Rey is a market researcher for Homegrow - Debt Consolidation Loans & New Home Loans
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