Mortgage fundamentals.

In our day to day life, we often come across a term ‘mortgage’ but rarely have an idea of what it really means. This article is aimed at clearing a cloud over mortgage, in order to make it more comprehensible.

Mortgage is an old English term derived from two French words “mort” and “gage” meaning “dead pledge”. It is a legal document in which the owner pledges his/her/its title to real property, to a lender as security for a loan, described in a promissory note. In other words it is a long term loan through a bank or other financial institution, or even through the seller of the property. Here the house and/or property serve as collateral for the loan. The two very important players in a mortgage game are –“the borrower and the lender”.

The lender provides the money on the property, a borrower is buying or refinancing under a few conditions;

1. The lender would like the entire debt repaid.

2. The lender would like to receive interest on his mortgage deal.

There are several things that a borrower should consider when choosing between mortgages such as individual needs, incomes, assets, perceptions, ages, etc. Mortgages run from 10 to 30 years, by the end of which they are to be paid off.

The two basic types of mortgage are as following;

1. Interest only mortgage. http://www.mortgagefit.com/interest-only.html

2. Repayment mortgage. http://www.mortgagefit.com/repayment-mortgage.html

There are several kinds of mortgage options available in the market. Few of them are;

1. Standard variable rate mortgage.

2. Tracker mortgage. http://www.mortgagefit.com/tracker-mortgage.html

3. Fixed rate mortgage. http://www.mortgagefit.com/frm.html

4. Capped mortgage. http://www.mortgagefit.com/capped-rate.html

5. Discount mortgage.

6. Offset mortgage.

7. Balloon mortgage

8. Green mortgage.

9. Islamic mortgage.

10. Chattel mortgage.

11. Cash back mortgage.

12. Drop lock mortgage.

13. Current account mortgage.

14. Endowment mortgage.
15. Pension mortgage.

16. Permanent mortgage.

Hence considering these few types, from a broad spectrum of mortgages, a borrower has the option to chose the mortgage which best suits him. There is a higher degree of risk involved in a mortgage deal. Mortgage terms and rate of interest may also vary.

The following are the precautions, ‘the borrower and the lender’ should take to make their mortgage deal successful;

1. The borrower should always be aware of the major changes taking place in the market.

2. The borrower should have the ability to overcome the oncoming risk, and arrange for refinances whenever required.

3. The borrower should be able to foresee the consequences resulting from mortgage deal.

4. The lender should have full knowledge of the pros and cons of the property used for taking a mortgage.

5. The lender should be aware of the financial position and credit history borrower.

If you have any other queries related to mortgage, feel free to visit this site http://www.mortgagefit.com

And our knowledgeable mortgage staff will answer your first 5 questions for free.