WHAT IS MORTGAGE LOAN.

WHAT IS MORTGAGE LOAN.

BECTIC FINANCE COMPANY LIMITED.

A mortgage is a type of loan that’s used to finance property. Mortgages are “secured” loans. With a secured loan, the borrower promises collateral to the lender in the event that they stop making payments. In the case of a mortgage, the collateral is the home.

The term mortgage refers to a loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property serves as collateral to secure the loan. A borrower must apply for a mortgage through their preferred lender and ensure they meet several requirements, including minimum credit scores and down payments. Mortgage applications go through a rigorous underwriting process before they reach the closing phase. Mortgage types vary based on the needs of the borrower, such as conventional and fixed-rate loans.
https://www.investopedia.com/terms/m/mortgage.asp

A mortgage loan or simply mortgage (/’m??rg?d?/) is a loan used either by purchasers of real property to raise funds to buy real estate, or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is “secured” on the borrower’s property through a process known as mortgage origination. This means that a legal mechanism is put into place which allows the lender to take possession and sell the secured property (“foreclosure” or “repossession”) to pay off the loan in the event the borrower defaults on the loan or otherwise fails to abide by its terms.
https://en.wikipedia.org/wiki/Mortgage_loan

A mortgage is a legal instrument which is used to create a security interest in real property held by a lender as a security for a debt, usually a loan of money. A mortgage in itself is not a debt, it is the lender’s security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.
https://en.wikipedia.org/wiki/Mortgage_law

HOW DOES A MORTGAGE LOAN WORK?

When you get a mortgage, your lender gives you a set amount of money to buy the home. You agree to pay back your loan – with interest – over a period of several years. You don’t fully own the home until the mortgage is paid off.

Individuals and businesses use mortgages to buy real estate without paying the entire purchase price upfront. The borrower repays the loan plus interest over a specified number of years until they own the property free and clear. Mortgages are also known as liens against property or claims on property. If the borrower stops paying the mortgage, the lender can foreclose on the property.

For example, a residential homebuyer pledges their house to their lender, which then has a claim on the property. This ensures the lender’s interest in the property should the buyer default on their financial obligation. In the case of a foreclosure, the lender may evict the residents, sell the property, and use the money from the sale to pay off the mortgage debt.

KEY TAKEAWAYS;
Mortgages are loans that are used to buy homes and other types of real estate.
The property itself serves as collateral for the loan
Mortgages are available in a variety of types, including fixed-rate and adjustable-rate.
The cost of a mortgage will depend on the type of loan, the term (such as 30 years), and the interest rate the lender charges.
Mortgage rates can vary widely depending on the type of product and the qualifications of the applicant.

PARTIES INVOLVED IN A MORTGAGE.

There are two parties involved in every mortgage transaction – a lender and a borrower.

A LENDER.

Mortgagor: The mortgagor is you, the borrower.
A lender is a financial institution that loans you money to buy a home. Your lender might be a bank or credit union, or it might be an online mortgage company like Bectic Finance Company Limited.

When you apply for a mortgage, your lender will review your information to make sure you meet their standards. Every lender has their own standards for who they’ll loan money to. Lenders must be careful to only choose qualified clients who are likely to repay their loans. To do this, lenders look at your full financial profile – including your credit score, income, assets and debt – to determine whether you’ll be able to make your loan payments.

BORROWER.
Mortgagee: The mortgagee is the lender.
The borrower is the individual seeking the loan to buy a home. You may be able to apply as the only borrower on a loan, or you may apply with a co-borrower. Adding more borrowers with income to your loan may allow you to qualify for a more expensive home

THE MORTGAGE PROCESS.

The mortgage process can be complicated, but can be broken into a number of steps: pre-approval, house shopping, mortgage application, loan processing, underwriting, and closing. … Once you’ve found a property and put in an offer, expect the mortgage closing process to take up to 45 days to complete.

TYPES OF MORTGAGE.

Mortgages come in a variety of forms. The most common types are 30-year and 15-year fixed-rate mortgages. Some mortgage terms are as short as five years while others can run 40 years or longer. Stretching payments over more years may reduce the monthly payment, but it also increases the total amount of interest the borrower pays over the life of the loan.

TYPES OF MORTGAGE:

CONVENTIONAL MORTGAGES.
A conventional mortgage or conventional loan is a home buyer’s loan that is not offered or secured by a government entity. It is available through or guaranteed by a private lender or the two government-sponsored enterprises.

FIXED-RATE MORTGAGES
With a fixed-rate mortgage, the interest rate stays the same for the entire term of the loan, as do the borrower’s monthly payments toward the mortgage. A fixed-rate mortgage is also called a traditional mortgage.

ADJUSTABLE-RATE MORTGAGES.
A variable-rate mortgage, adjustable-rate mortgage, or tracker mortgage is a mortgage loan with the interest rate on the note periodically adjusted based on an index which reflects the cost to the lender of borrowing on the credit markets. The loan may be offered at the lender’s standard variable rate/base rate

ARMs typically have limits, or caps, on how much the interest rate can rise each time it adjusts and in total over the life of the loan.

FHA LOANS.
A Federal Housing Administration (FHA) loan is a mortgage insured by the FHA and issued by an FHA-approved lender. FHA loans require a lower minimum down payment and lower credit scores than many conventional loans and are principally designed for low- to moderate-income borrowers.

USDA LOANS.
A USDA home loan is a mortgage either made or guaranteed by the United States Department of Agriculture’s Rural Housing Service agency to help households with very low to moderate incomes purchase safe and affordable homes in rural areas.

VA LOANS.
A VA loan is a mortgage loan that is backed by the U.S. Department of Veterans Affairs. These loans are available to people who are actively serving in the military or who have served and received an honorable discharge. Family members of service personnel also may qualify for a VA loan.

JUMBO LOANS.
In the United States, a jumbo mortgage is a mortgage loan that may have high credit quality, but is in an amount above conventional conforming loan limits.

WHY DO PEOPLE NEED MORTGAGES?

Most people who buy a home do so with a mortgage. A mortgage is a necessity if you can’t pay the full cost of a home out of pocket. … For example, investors sometimes mortgage properties to free up funds for other investments. To qualify for the loan, you must meet certain eligibility requirements.

CAN ANYBODY GET A MORTGAGE?

Who can get a mortgage? Generally speaking, mortgages are most accessible to people aged between 25 and 40, who have a larger than average and reliable income, a sizeable amount of savings to use as a deposit and a healthy credit rating.

WHAT DOES FIXED VS. VARIABLE MEAN ON A MORTGAGE?

Many mortgages carry a fixed interest rate. This means the rate will not change for the entire term of the mortgage (typically 15 or 30 years) even if interest rates rise or fall in the future. A variable or adjustable-rate mortgage (ARM) has an interest rate that fluctuates over the loan’s life based on what interest rates are doing.

HOW MANY MORTGAGEE CAN I HAVE ON MY HOME?

The short answer is that you can have up to 10 conventional mortgages in your name at once. However, in practice, experienced real estate investors know it’s possible to use alternative financing methods to take on even more mortgage debt.

THE ADVANTAGES AND DISADVANTAGES OF HAVING A MORTGAGE.

Having your own home is a goal for many people Yet, in order to buy a house, most of us will have to take out a mortgage. It’s either that or having the prospect of staying in rented accommodation for the foreseeable future. Taking out a mortgage is a major life decision and one that should only be taken after much consideration. Here are some pros and cons to help make up your mind regarding taking out a mortgage.

ADVANTAGES.

1. By writing off mortgage interests, you can reduce your total annual payments significantly. This feature does not reduce the amounts due in installments but can reduce the payable income tax to a significant degree.

2. It is usually not possible for people to buy real estate for cash up front. Mortgages enable you to buy a house without having to pay the entire amount immediately.

3. Long term mortgages have lower interest rates, making it easier on the borrower.

DISADVANTAGES.

1. The burden of debt can generate a great amount of financial distress. In families of certain socioeconomic backgrounds this requires them not only to cut back on certain expenditures, but often they also have to compromise their standard of living.

2. If your property is mortgaged for a significant amount of time (15 to 30 years) it hampers other financial decisions and one’s ability to secure another major loan.

3. The value of the property itself may change over the years due to changing market rates. This has other undesirable implications on the loan taken.

WHERE CAN I GET A MORTGAGE?

Mortgages are offered by a variety of sources. Banks and credit unions often provide home loans. There are also specialized mortgage companies like Bectic Finance Company Limited that deal with home loans. You may also employ an unaffiliated mortgage broker to help you shop around for the best rate among different lenders.

MORTGAGE NOTE;
A mortgage note (or promissory note) is a written document that details the agreed-upon terms for the repayment of the loan being used to purchase a property. It’s like an IOU that includes all of the guidelines for repayment.

These terms include:

Interest rate type (adjustable or fixed)
Interest rate percentage
Amount of time to pay back the loan (loan term)
Amount borrowed to be paid back in full.

Once the loan is paid in full, the promissory note is given back to the borrower. If you fail to uphold the responsibilities outlined in the promissory note (i.e. pay back the money you borrowed), the lender can take ownership of the property.

To understand how much you can afford and what loans you might be eligible for, use Bectic Finance mortgage. Our online application is a fast way to get approved for a home and get expert mortgage recommendations.

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