mortagesandforeclosures

by Mikel Dormier

Mortgage loans is secured loans that are given for the purchase of landed property or real estate. Usually the property will be pledged to the bank as a security against the loan amount, which lowers the risks considerably for the creditors and thus enables them to offer lower interest rates compared to other loans and for longer duration.

These loans are low risk because the loan amount that is advanced on the property would often be much lower than the actual or estimated value of the real estate. The risk is further lowered as non repayment or default in payment can endow the creditor with the legal right to sell the property or auction it to realize the debt amount. The amount of loan that is usually sanctioned depends upon the worth of the property.

The value of the real estate is usually determined by employing the services of a suitably qualified and licensed surveyor. These surveyors base their calculation on past purchases and current acquisitions. The market value of a landed property is arrived at through comparison with similar types of real estate or by taking into account current market prices and inflation rates.

Mortgages are usually procured for purchasing landed property or real estate by pledging the property with the creditor until such time that the loan amount is repaid. The eligibility of an individual to procure these loans depends on their credit rating and other monetary parameters. These scores are carefully evaluated by the lending authority before sanctioning these mortgages.

Mortgage loans are classified into different types based on the term of the loan, the interest rates being either floating or fixed and the payment schedule and frequency. The term usually extends over a period of 20 years or more and though the interest rates are lower owing to the low risk factor associated with secured loan, most debtor end up paying much more than they borrowed by the time they manage to pay up the loan.

Most lending institutions charge a fee for the processing the loan application and also levy a penalty for foreclosure or prepayment of the loan.

The risk involved for a creditor in a mortgage loan is minimal owing to the fact that the loan advanced, would be for a part of the value of the property that has been pledged as a collateral. In the case of non repayment or default, the creditor can seek legal recourse to attach the property and liquidate it to realize the debt.

Finding your home is stressful enough, make sure you also get the right mortgage. There are a number of great options, ARMs, 30 year fixed loans that you can take out to pay for your new home.

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