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Understanding The Concept of Mortgages:
Whenever someone purchases a property a mortgage is taken, a mortgage loan that is money is borrowed by the purchaser and the property is used as collateral. Purchasers find a suitable company/individual who provides such services and the deals are done through a broker.
The lender of the mortgage loan is often an institution such as a bank, credit union, trust company, finance company, insurance company or pension fund. Private individuals occasionally lend money to borrowers for mortgages. The lender of a mortgage will receive monthly interest payments and will keep a lien on the property as security that the loan will be repaid. The borrower will receive the mortgage loan and use the money to purchase the property and receive ownership rights to the property. When the mortgage is paid in full, the lien is removed. If the borrower fails to repay the mortgage the lender may take possession of the property.
Further mortgage payments are set according to mainly 3 factors.
1- Amount of money borrowed
2 - Rate of interest
3 - Time period for which the money is borrowed
The length/time period for which the mortgage is given varies depending on how much the person is willing to pay every month. A typical mortgage lasts 10 to 25 years. Buyers have to maintain a good credit score to get mortgage without any hassle.
First-time home buyers will often seek a mortgage pre-approval from a potential lender for a pre-determined mortgage amount. Pre-approval assures the lender that the borrower can pay back the mortgage without defaulting. To receive pre-approval the lender will perform a credit-check on the borrower; request a list of the borrower's assets and liabilities; and request personal information such as current employment, salary, marital status, and number of dependents. A good credit score is always desired for a better mortgage loan.
Mortgage if used the way it is meant to be is a great, it helps us to build a house of our dream.