Definition and terms to know
A mortgage is a legal agreement that gives a borrower the conditional right of ownership of an asset or property (mostly real estate) by its owner who is the Mortgagor to a lender who is known as the Mortgagee which serves as a guarantee for a loan. Furthermore, the security interest of the lender is then documented in the register of title documents in order to make it public information and it is thereafter rendered void upon the completion of the loan.
A mortgage loan or a mortgage is a tool that is used to create a borrowing power (lien) on a real estate property by contract. It is a means by which individuals or corporate bodies can buy buildings either residential or commercial property without having to pay the whole value of the property before accessing it.
Furthermore, there are different types of mortgages, and the type of mortgage an individual or business would decide to go for will differ based on the needs and the capabilities of such individuals or businesses. Noteworthy, in business terms, the borrower is known as the Mortgagor while the lender is referred to as the Mortgagee.
In addition, all legally owned properties could be mortgaged even though both land and buildings are the most mortgaged real properties. The Chattel mortgage is the mortgaging of personal properties such as cars, pieces of jewelry, and appliances.
In the event that equipment, real properties, and vehicles are mortgaged, the right of ownership and the use of the property is solely dependent on the owner. In addition, at any point in time, the mortgagee could request to be given back his property except if it is stated in the agreement that he is banned from doing such. Furthermore, the Mortgagee does this to protect his interest especially in the case of default on the part of the mortgagor.
All over the world, there are many types of mortgages. The types of mortgages in each country vary and it depends to a large extent on local laws that are being operated and also the legal documentation required to process mortgages.
Below are the major factors considered in mortgages:
- Payment term: Most mortgages always have long term duration for their payment. Noteworthy, some can get to as high as 30 years. The payment term is usually fixed while the negotiation is on.
- Interest rate: Just like the payment term, the interest rate is also always negotiated upfront. Although there are mortgages with a fixed interest rate, however, there are some with changing interest as well. The rates, however, are subject to economic realities.
Finally, as a borrower, it is your duty to look out for this part before signing the necessary documents.
- The frequency of payment: Another important aspect of the negotiation is either the payment would be on a monthly basis or annually. The frequency chosen depends on the agreement reached between the borrower and the lender.
As earlier stated there are many types of mortgages some examples are:
- Repayment mortgage
- Interest-only mortgage
- Fixed-rate mortgage
- Standard variable rate (SVR) mortgage
- Discounted rate mortgage
- Tracker mortgage
- Capped rate mortgage
- Cashback mortgage
