Definition
Mortgage, basically refers to the process of getting money, by keeping one or more of, one’s precious assets such as land, jewellery etc, as a guarantee. The mortgaged item or asset is freed, after the borrowed money is returned to the creditor.
Lender and Borrower
These are the two main participants of this process.
Borrower is the one, who asks for money or who is in need for money. The mortgaged item belongs to him.
Lender is the one, who lends money to the borrower and keeps the mortgaged item ,till the time the payment is made back. The lender has the power to keep the mortgaged item if timely payment is not done.
Types of mortgage
- Reverse mortgage - In this , the transaction stream is reversed, as the name suggests. Here instead of borrower paying the money to the lender, the lender pays monthly installments to the borrower. It is basically used to improve the financial personal independence of older people.
- Usufructuary mortgage - Here the lender takes the property and uses it ,until he gets the payment. Example: the lender can use it for rent until he gets the payment.
There are other types too, but the main intent is lending and borrowing of the money by keeping the property or any other precious asset as a guarantee, except the payments can be in installments or some other modes.
This is another very clear blog that could teach a beginner about mortgages and its types. The points quoted above could be understood easily as it was explained in simple language. Also, the terms and conditions of different types of mortgages are well defined. This is a very clear blog that can be used as a reference. Nice write author!
A well-explained article on mortgage. The concept is to get money from the lender in return of a valuable asset. The asset is handed as security by its owner to the lender. Thus, there is sense of security to the lender that in the consequence of non-payment of loan the right of ownership of asset is to the person who has lended the money.
A very cool article on mortgage, which does not have too many words with financial meaning , otherwise I wouldn’t have been able to understand it. I’ve read some more articles written by the author and they were always crisp, to the point and simple to understand. We laymen need more writers like this. Keep them coming!!
When getting the loan for a house for example and you don´t have enough assets to convince the bank that you are capable of paying the loan. You may put the house in question as a collateral if you couldn´t manage to pay the loan. It goes without saying that you will do anything that is in your power to obtain the house.
Comments are closed.