FINANCE: What is Mortgage?
July 24, 2008 – 9:04 pm
Nowadays mortgage is a popular subject and everyone wonders the system of it, what it means. Encarta dictionary defines the word “mortgage” basically as “an agreement by which somebody borrows money from a money-lending organization such as a bank or savings-and-loan association and gives that organization the right to take possession of property given as security if the loan is not repaid.” (*) The popular mortgage system is a little bit different from this definition, mortgage is not just lending and borrowing money, in our world, it is a chance for everyone to possess a house.
House for Everybody: Mortgage
House loan system was firstly used in the United States of America, and now in many countries, people buy house with mortgage. It is a system which gives you the chance of having a house with regular payments; you have a house like you are paying rent every month.
The price of the house is paid by mortgage system, in other words by money lender. The persona who buys the home pays an amount of money in cash, and the rest of money is paid in the frame of agreement for periods.
Saving money is a way of buying property, however it takes a long time, and you are not sure that you will certainly buy a house. With mortgage, first you buy, then you pay, and with the agreement between lender and you, the conditions are clear. In addition to buying a house to live, mortgage system can be used for investment.
With mortgage not only people own house, but also building sector becomes livelier, real estate agencies play key roles. Waiting for buying house will no longer be an idea of future, no need to wait, if you provide required conditions, anyone can get mortgage credit. If there is thought of buying a house, it means you have some amount of money already, rest of it is provided from banks, friends etc., mortgage ends this process.
A negative side of mortgage is that with this system prices increased, or sellers began to wait for it. So before buying a house, compare the previous price of it with its current price. If the difference is not so much, it is reasonable to buy.
As time passes, mortgage is becoming more and more popular all around the world, this makes it more functional and the laws about lending and borrowing are passed, this is the guarantee part of mortgage.
Security and Mortgage
Of course, not every application is accepted by money lenders, security is an obligation. Money borrower has to fulfill requirements and first of all, the money lender has the right over property, until all the credit is paid, the title belongs to money lender. When money borrower fulfilled every requirement and paid all the debt, the situation changes. If a problem occurs and the loan is not paid, the property belongs to credit giver.
Money borrower accepts the things in the agreement, it is agreed that the necessary obligations will be fulfilled, otherwise, borrower is aware of the fact that credit giver has the right over property.
* Word “mortgage” definition from Encarta
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