Mortgage Loan
A mortgage loan is nothing more than a real estate debt instrument. Acquiring a mortgage loan is the most common method of financing a home in America. The benefits are tremendous and the availability of it is dictated both by the risk the borrower presents to the lender, and the present moment of the country’s economy.
Here’s the play-by-play to better visualize the whole idea of a mortgage loan:
Jerry wants to buy a house that costs $200,000. But he doesn’t have 200k to spend at once - or he does but spending that amount of money will damage his cash flow. Because he doesn’t want to have a house but live miserably – plus, every new house comes with hidden costs…- he goes to a mortgage lender to ask for a mortgage loan.
The lender checks Jerry’s credit score and puts it against the price of the house to figure out if they are willing to take the risk on Jerry’s dream and financial health. If they are, then the mortgage loan is on. They will pay the $200,000 directly to the home seller and sign a contract with Jerry to allow him to move the home, that is “jointly owned” by the bank and Jerry. Now, every month, Jerry has to pay a certain amount of money combined with a specified (and agreed by contract) amount of interest that is deducted from the total amount. With every payment, Jerry acquires more equity to the home.
If everything goes along smoothly, Jerry pays the mortgage loan in its entirety, erases his debt, and the house becomes 100% his, thank you very much mortgage lender bye-bye.
However, if it doesn’t… big problems ahead.
A mortgage loan basically means that, as collateral, is the house itself. If something happens and Jerry defaults too much and fails to terminate his debt in a timely manner, the house goes in foreclosure and heads to auction so the lender can return its investment, and Jerry – having paid from 1% to 99%; doesn’t matter – loses everything.
Real Estate tip:
Here’s a great sort of mortgage loan: we will give you the best local real estate agents and you’ll give us… well, nothing because The OFFICIAL Real Estate Agent Directory® is 100% FREE! So I guess it’s not a mortgage loan after all, right? It’s just amazing. Yeah, we think so too. Enjoy!
Popular Real Estate Terms
Legal document that conveys real estate to the lender after the borrower defaults on his or her mortgage payments. The borrower should demand cancellation of the unpaid balance and a ...
Large room at the entrance to a building designed for people to converse or move about freely. ...
Person who will become the beneficiary if the original beneficiary dies before the insured. It is the policyholder's second election as beneficiary, dependent on the status of the primary ...
Appraisal by summation is an Alias for Replacement Cost A.K.A. Cost Approach, which is one of the approaches an Appraiser can go through in order to assign a Market Value to a ...
fee to use a bridge or tunnel. Fee assessed to use someone else's property. ...
Highly subjective term, usually an expression of monetary worth applied to a particular piece of real estate property. ...
One who agrees to pay the debts of another in the event that the debtor does not pay. The creditor can demand payment from the surety as soon as the debt becomes due. Although a surety ...
Judicial order prohibiting a person or business from doing something. The court may issue this dictate when unlawful conduct or activity is occurring. ...
Contractual agreement between a commercial or industrial rental property owner and an individual or firm who agrees to maintain the property. Management agreements specify the nature of ...
Have a question or comment?
We're here to help.