Homes And Mortgages

Information about a mortgage loan

In lay mans language, a home mortgage is a loan obtained by builders and home owners to enable them to acquire real properties such as homes and rental houses. During the process of securing home acquisition loans and mortgages, mortgage note acts as an evidence of the loan agreement between the lender and the prospective home owner.

Step 1

Home mortgages are secured from financial institutions like banks. The process can occur directly where the home owner contacts the lending institution personally or indirectly whereby intermediaries act as a link between the home owner and mortgages' lender. Although home mortgages are common in that they are all used as a financing strategy to acquire real properties and homes, home mortgages vary considerably as they have different features.

Step 2

Features of home mortgages

Although there are many forms of home financing and mortgages, there are basic features that are present in all types of mortgages, which differentiate them from other financial contracts and mortgages used to acquire new homes. However, all these mortgage's characteristics are subject to legal requirements and local regulations, which vary from one jurisdiction to another.

Step 3

The basic feature of mortgages is interest. Interest on mortgage may be variable or fixed. The relationship between interest and mortgages also exists in terms of low or high interest rates, which define the cost of financing home acquisition through mortgages.

Step 4

A home-mortgage term defines the repayment time of home mortgages. Home mortgage frequency and payment simply mean the amount of money that the home owner pays in a given period and the frequency of remitting the payments to the lender. Some mortgages have a prepayment feature which is the amount restricted or limited by certain mortgages for a portion or for the whole mortgage amount.

Basic types of home mortgage amortized loans

Amortized home-mortgage loans are fixed-rate mortgages and mortgages whose rate is adjustable. Adjustable rate home mortgages are also referred to as variable or floating-rate home mortgages. In a fixed rate home loan, interest rates and mortgages periodic payments are fixed and constant during the life time of the mortgage. However, ancillary costs like insurance and mortgage's property taxes change during the term of the mortgage. Adjustable rate home mortgages are characterized by an interest rate that is fixed in a certain period of time after which it is adjusted either upward or downward to match market rate indexes.

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