Glossary Finance Mortgage

Mortgage

Mortgages are sums of money lent by financial institutions for the purpose of buying property. In a typical arrangement, the would-be homeowners will approach the financial institution about their prospective purchase and will themselves put up a percentage of the total purchase price of the home, for example 20%.

The financial institution, after verifying that the home has been valued appropriately, will put up the remainder of the purchase price. The entire sum of money will then be paid to the seller of the home and mortgage customers will be required to make regular payments to the mortgage provider until their debt is paid off. Thus the customer needs to seek the best mortgage rates before getting into the agreement.

If the customer defaults on the debt, ownership of the property reverts to the financial institution that provided the mortgage, a practice known as repossession. Mortgage refinance is the alternative for such a situation. The terms of a mortgage can vary but would typically run to around twenty years or so.

A wide variety of mortgages exists. Some are geared towards first-time buyers of homes; some require only repayment of interest on the initial loan while a separate account is used to invest in shares with the goal of ultimately repaying the capital from the proceeds of the investment strategy; some feature fixed rates of interest while others can change.

People who find a property with great difficulty, dissolve their stock brokerage and even go for mortgage against their credit card in order to acquire that property, unintentionally increasing their cash debt ratio.

New Substack Newsletter

Brain and soul musings. Thoughts and opinions on Business, Tech, Education, Marketing and Growth Hacking.