Mortgage Loan
The practice of giving away loans against property used as mortgage has made it possible for countless families to own their houses that they could not afford to buy at market price.
Loans associated with mortgage are convenient way of owning residential and business real estate without the need to make full payment. In many parts of the world the residential house purchases are normally financed by a mortgage. In such cases the real estate for which loan is taken is mortgaged to the lender as a type of security until the outstanding loan amount is fully paid. As long as the loan repayment instalments are coming in time the lending bank or financial institution does not disturb the mortgaged property. The “mortgager” who has borrowed money uses the mortgaged property without hindrance so long as he meets the loan repayment obligations. However in case of default in payment the situation could rapidly change.
The laws and rules governing the mortgage vary from country to country and often from region to region. The debtor who borrows the money against the mortgaged property could be an individual or a group of individuals as in case of mortgage loans taken for business purpose. Typically the debtors could be private property owners, land owners of business owners. It is the obligation of the debtor to meet the terms of the deal and conditions of the mortgage. In case the obligations are not fully met, say for example in the event of a default in payment, the debtor runs the risk of foreclosure of the mortgaged property. It should be understood that the main business of the lender is earning from the loan interest – foreclosure is not main business. In fact foreclosure is resorted to only as the last measure. The lender is not interested in bothering the debtor as long as he meets the terms of the loan.
Mortgage loan is a specialized field. The individuals who are interested in purchasing residential houses by way of mortgage-financing may not be fully aware of the local laws and customs in force. They may not be aware of the existing markets – the markets for real estate as well as the lending institutions. Therefore they can take help of mortgage brokers that are knowledgeable in this field. The brokers can help find a good property at competitive price and also suggest suitable bankers. In many places the mortgage brokers are certified by the local authorities such as Certified Mortgage Planners. The individuals seeking residential properties and means to finance them will be well advised to take services or registered mortgage brokers instead of moving in the wilderness in the maze of complicated legal details. Even after entering into an agreement the debtor will do well to understand the terms. It is rather surprising that considerable people actually pay higher instalment than required because they were not aware of the terms.
Normally there are two types of instruments used for mortgage loans. One is simply called the mortgage. In this case foreclosure requires judicial intervention. The lender has to prove in the court of law that there has been breach of the terms of loan, maybe repeated defaults in the repayments, and foreclosure can be enforced. Actual foreclosure only takes place after permission is granted by the court. As i obvious this process is lengthy and time consuming. Therefore other instrument of mortgage loan is frequently used. This is called the deed of trust. In several regions the deed of trust authorises the lender to foreclose, if necessary, without referring the matter to the court. This process is much faster, has much less hassles and is also much less costly. The foreclosure procedure can be accomplished in about 3 month’s time. On the other hand involvement of judicial process could elongate the time to one year or so.
Can a borrower take loans from 2 or more sources by mortgaging the same property to all of them? How will the potential lenders know that the property has already been mortgaged to some other party? There are enough safeguards in the legal system to protect both the borrower as well as lender. A mortgage by legal charge is recorded in public registers that are accessible to all. The creditors verify that the property is not already mortgaged before sanctioning the loan. The person interested in purchasing a property can also check with the public registers to ensure that the property he wants to buy is not under any mortgage deals.
The loan term for real estate is usually quite long; typically it is 30 years. Within that period it is quite likely that the market value of the mortgaged property will increase substantially. The borrower can consider re-negotiating the loan terms in his favour. The borrower can also consider paying off the debt before the end of the term in which case he will save on total outflow of money by way of repayment instalments.
Loan against mortgaged property has become a popular way of owning a house without the need to make full payment upfront. The system is a blessing for those desirous of owning a house but having limited resources.
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