What is a Mortgage? Know the Basics of Mortgage Loan

 In life, we experience certain situations, from where we cannot avoid some expenses. A number of these expenses include business expansion, marriage, medical emergencies, or education. One such solution to satisfy these needs would be to avail of a Mortgage loan. It is a secured loan. A borrower must mortgage a property with the lender to avail this sort of loan against the property. The collateral is held by the lender until full repayment of the loan is completed. Borrowers repay the loan in fixed monthly payments called equated monthly installments (EMIs).

What is a Mortgage Loan?

It is just a loan against a property that you simply own. The property in question might be your house, a shop, or maybe a non-agricultural piece of land. Banks and non-banking finance companies offer this. The lender provides you the principal loan amount and charges you an interest thereon. You’ll repay the loan in affordable monthly installments. Your property is your guarantee and it stays in possession of the lender until the loan is repaid fully. As such, the lender features a legal claim over the property for the tenure of the loan, and if the borrower defaults in paying off the loan, the lender has the right to seize it and auction it off.

Types:

There are various forms of mortgages:

1. Simple Mortgage: In such type, the borrower must sign an agreement stating that if he/she is unable to pay back the borrowed amount in a specified time duration, then the lender can sell the property to anyone to get a refund
2. Mortgage by Conditional Sale: Under it, the lender can put a particular number of conditions that the borrower must follow in terms of repayment. These conditions may include the sale of the property if there’s a delay within the monthly installments, a rise within the rate of interest due to delay in repayment, etc.
3. English Mortgage: In this, the borrower has got to transfer the property within the name of the lender at the time of taking money, at a condition that the property would be transferred back to the borrower once the entire amount is paid back
4. Fixed-Rate Mortgage: When the lender assures the borrower that the rate of interest will remain an equivalent throughout the loan period is named Fixed-Rate Mortgage